FIZZ FIGHT HOW SODA TAXES AFFECT COCA-COLA S …

FIZZ FIGHT: HOW SODA TAXES AFFECT

COCA-COLA’S BUSINESS STRATEGY

Margaret Sherman and Harold Weston *

I. INTRODUCTION

How does a firm respond when government tries to tax away

demand for its products? It responds with typical opposition (litigation,

public relations, lobbying), and in the case of sugar taxes on soft

drinks, by changing its business strategy to offer different products.

Thus, in addition to the impact sugar taxes may have on consumer

demand behavior, sugar taxes have significant impact on supplier

behavior, as this study on The Coca-Cola Company’s responses to

soda taxes shows.

Since 2012, state and municipal governments in the United

States, and in other countries, have considered and implemented taxes

on sodas and sugar-sweetened drinks to address the growing obesity

epidemic. Such taxes are often called “sin taxes” because they are

assessed against products deemed to have a harmful effect in order to

decrease consumption of the products. The goal of the sugar taxes (or

soda taxes, because the tax applies mainly to soft drinks with sugar) is

to discourage consumption and encourage manufacturers to modify

their products. In addition, governments have focused on taxing sodas

and sugary drinks because the revenue generated by soda taxes can

fund public health programs or raise much-needed general revenue for

communities.1 The American Heart Association recommends a daily

maximum intake of 25 grams of sugar for adult women and 36 grams

for adult men. Compare this against a 20-ounce bottle of regular Coca-

* Margaret Sherman is Clinical Associate Professor of Legal Studies, and Harold Weston is

Clinical Associate Professor of Risk Management and Insurance, at Georgia State

University, J. Mack Robinson School of Business, Atlanta, Georgia. Professor Weston also

holds a secondary appointment at the Georgia State University College of Law.Assistant

Professor of Business Law & Ethics, Georgia College

1 Lester Wan, Elaine Watson, & Rachel Arthur, Sugar Taxes: The Global Picture in 2017,

BEVERAGEDAILY.COM, Dec. 20, 2017,

https://www.beveragedaily.com/Article/2017/12/20/Sugar-taxes-The-global-picture-in-2017.

32 Journal of Legal Studies in Business [Vol. 22]

Cola having 65 grams of added sugar.2 Governments further argue the

taxes are warranted because obesity is now at crisis levels: over 1.9

billion adults in the world are overweight (a body mass index of 25 or

higher) in 2016, and of these, 650 million qualified as obese (a body

mass index of 30 or higher), according to the World Health

Organization (“WHO”).3 In the United States specifically, 39.8%

(about 93.3 million) of adults qualified as obese in 2015 to 2016. 4

Obesity reduces quality of life, and causes diabetes, heart disease,

stroke, and some types of cancer.5

As a result of this drive to impose soda taxes, The Coca-Cola

Company (“Coke”) and other soft drink manufacturers confront a

changing regulatory environment for their products. Coke and the soft

drinks industry have responded to the state and municipal initiatives

with two strategies. The first strategy is to oppose the taxes by

lobbying, litigation, sponsoring research, direct marketing and

advertising campaigns, and funding opposition organizations that

support these tactics. Coke and the soft drinks industry argue there is

no scientific evidence to support the effectiveness of soda taxes and

such measures destroy jobs in the industry.6 The second strategy is to

modify products to reduce and reformulate the caloric content of some

2 Anna Lappe & Christina Bronsing-Lazalde, How to Win Against Big Soda, N.Y. TIMES, Oct.

16, 2017, at A21. 3 World Health Org., Obesity and Overweight Key Facts, (Feb. 16, 2018),

https://www.who.int/en/news-room/fact-sheets/detail/obesity-and-overweight. The 2016

statistics are the most recent provided on the WHO website. 4 Centers for Disease Control and Prevention, Adult Obesity Facts, (Aug. 13, 2018),

https://www.cdc.gov/obesity/data/adult.html. The 2016 statistics are the most recent

provided on the CDC website. 5 Id. 6 Wan, Watson, Arthur, supra note 1.

https://www.who.int/en/news-room/fact-sheets/detail/obesity-and-overweight

2019 Fizz Fight: How Soda Taxes Affect Coca Cola’s Strategy 33

beverages, offer smaller-sized beverage containers, and add new

products to appeal to market tastes that are being influenced by public

health initiatives against obesity.

While soda taxes impact the entire beverage industry, this

paper focuses on Coke since it is the world’s largest nonalcoholic

beverage company. This paper examines the impact of recent

initiatives to tax soft drinks on Coke’s business, and Coke’s responses

to such taxes, acting both individually and through the American

Beverage Association (“ABA”), the trade association for the soft drink

industry which is dominated by Coke, Pepsi and Dr. Pepper Snapple,7

Section II of the paper provides a brief background on Coke as a

company. Section III explores the obesity epidemic. Section IV

includes an overview of the various soda tax initiatives in the U.S.

primarily, and in other countries, and the efforts by Coke to resist or

seek to modify the tax initiatives through legislation and lobbying,

litigation and other strategies. Section 0 discusses the government

rationale for implementing sin taxes, and in particular soda taxes,

which come within the idea of sin taxes. Section 0 reviews the impact

of these initiatives on Coke and its efforts to adapt to the new

regulatory environment, including modification of, and diversification

of, its product line. The lesson here is that Coke’s change in business

strategy shows that soda taxes, intended to affect consumer purchasing

behavior to reduce calorie consumption and thus achieve individual

welfare goals, also affected (perhaps more forcefully) the

7 Marion Nestle, Soda Politics 93 (2018).


manufacturer’s behavior to reduce caloric content through changes in

portion size and product offerings. Therefore, the role of law in

business is not merely a matter of compliance with law and avoidance

of liabilities, 8 but also a matter of influencing business strategy.

II. THE COCA-COLA COMPANY

Coke is a part of American culture and one of the most

recognized global brands. Atlanta pharmacist John Pemberton

invented the beverage in 1886, and in 1888 Pemberton sold the

company to Atlanta businessman Asa Candler. Originally, Coke sold

its sodas only as fountain drinks in the form of a syrup mixed with

carbonated water. Coke products were first bottled for sale in 1894 in

Vicksburg, Mississippi, from the syrup, by the store’s owner, Joseph

A. Biedenharn, who noticed the brisk sales of the fountain drinks. He

sent a case of the bottles to Asa Candler, who was unimpressed with

the idea of bottling the beverage and preferred to focus on the fountain

drink sales. A few years later, in 1899, two entrepreneurs from

Chattanooga, Tennessee, obtained the bottling rights from Coke for $1,

and formed the first bottling plant. Coca-Cola bottle sizes originally

were 6.5 ounces, and sold for 5¢ from 1899 until 1959, because the

original $1 bottling agreement specified that price.9

8 The spectrum of legal issues includes employment, tax, corporate structures, corporate

securities (if applicable), contracts, products liability, pollution, etc. 9 World of Coca-Cola, About Us, Coca-Cola History, https://www.worldofcoca-

cola.com/about-us/coca-cola-history/. See also, David Kestenbaum, Why Coke Cost a Nickel

for 70 Years, NPR, Nov. 15, 2012,

https://www.npr.org/sections/money/2012/11/15/165143816/why-coke-cost-a-nickel-for-70-

years.


Coke is the world’s largest nonalcoholic beverage company.10

Coke markets, manufactures and sells beverage concentrates and

syrups, finished sparkling drinks and other beverages. Coke sells over

500 nonalcoholic beverage brands and approximately 4,300 different

products in over 200 countries. Over 1.9 billion daily servings of Coke

products are consumed each day.11

In its traditional soft drink business, referred to as the beverage

concentrates operations, Coke generally sells beverage concentrates

and syrups to bottlers who add sweeteners and water (the main raw

ingredients in Coke soft drinks) to produce the final beverage which is

then licensed under Coke trademarks or trademarks licensed to Coke.

The bottlers then sell to retailers, wholesalers and through other

channels. The list of brands includes billion-dollar products like Coca-

Cola, Coca-Cola Zero Sugar, Diet Coke, Fanta, and Sprite. The

principal nutritive sweetener used in the US is high fructose corn

syrup, and the principal sweetener used outside the US is sucrose

(table sugar). The principal non-nutritive sweeteners used are

aspartame, acesulfame potassium, sucralose, saccharin, cyclamate, and

10 David Gertner & Laura Rifkin, Coca-Cola and the Fight against the Global Obesity

Epidemic, 60 THUNDERBIRD INT’L BUS. REV. No. 2, 161-162 (Mar/Apr 2018). Coke sold

approximately 29.6 billion unit cases of its products in 2016, 29.2 billion in 2017, and 29.3

billion in 2018, according to its 2018 Form 10-K. The Coca-Cola Company 2018 Form 10-

K for the Fiscal Year ended December 31, 2018, 4, https://www.coca-

colacompany.com/content/dam/journey/us/en/private/fileassets/pdf/2019/annual-

shareholders-meeting/2018-Annual-Report-on-Form-10-K.pdf. 11 2018 Form 10-K, supra note 10, at 2, 32.


steviol glycosides.12 Classic Coke is 90% carbonated water and the

next largest ingredient is sugar or high-fructose corn syrup. A 12-

ounce serving has 140 calories or more, with 39 grams of sugar.13

In its finished product operations, Coke also sells a variety of

sparking water drinks, bottled waters, sports drinks, juices, teas,

coffees, and energy drinks to retailers, distributers, wholesalers and

bottling partners.14 For example, Coke sells bottled water under brand

names such as Dasani, Glaceau Smartwater, and Glaceau

Vitaminwater, and sells teas under brand names such as Gold Peak Tea

and Fuze Tea,15 and Minute Maid juice products and PowerAde sports

drinks.16

For Coke, in years 2016 through 2018, approximately 69% of

worldwide unit case sales were from soft drinks, with approximately

45% of sales from beverages that include the Coca-Cola or Coke

trademarks in the brand name, such as Coca-Cola, Coca-Cola Zero

Sugar, Diet Coke, Coca-Cola Life, and Cherry Coke. These brand

name Coke products accounted for 43% of unit case volume in the

U.S. market in 2018. Outside the US, Coke’s largest customer bases in

terms of unit case volume are Mexico, China, Brazil and Japan.17

Coke’s most significant competitors include PepsiCo, Inc.,

Nestle S.A., Dr. Pepper Snapple Group, Inc., Groupe Danone,

12 Id. at 7. 13 James Ellis & Dimitra Kesse, Coke’s Unlikely Savior, BLOOMBERG, Mar. 23-Apr. 5, 2015, at

28; NESTLE, supra note 7, at 39. 14 2018 Form 10-K, supra note 10, at 3. 15 Id. at 4. 16 Id. at 29. 17 Id. at 4.


Mondelez International, Inc., The Kraft Heinz Company, Suntory

Beverage & Food Limited, and Unilever.18 Coca-Cola and Pepsi

together control almost 50% of the world soft drinks market, with sales

doubling in the past decade to $532 billion.19

Despite significant sales, overall profits have been trending

downward. Coke’s net operating revenues in 2018 were

$31,856,000,000 (a 10% drop from the prior year), down from

$35,410,000,000 in 2017 and $41,863,000,000 in 2016. Gross profit in

2018 was $20,086,000,000, down from $22,155,000,000 in 2017 (a

9% drop) and $25,398,000,000 in 2016. Despite the decline in

revenues, and due in part to reductions in its spending and general

expenses, Coke’s income before taxes rose in 2018 to $8,350,000,000,

up from $6,742,000,000 in 2017 (a 24% increase). In 2017, income

before taxes had declined from $8,136,000,000 in 2016 (a 17%

drop).20 Income before taxes declined in 2017 from 2016 numbers as

well. Revenue and soda sales are both declining. In fact, American

soda sales have been declining for over twenty years. U.S. sales of

full-calorie soda have fallen by more than 25% during this time

frame.21 Overall soda consumption, which increased exponentially

from the 1960s through 1990s, is now experiencing a “serious and

18 Id. at 7. 19 Special Report on Obesity, Food for Thought, THE ECONOMIST, Dec. 15, 2012, at 10. 20 2018 Form 10-K, supra note 10, at 48; The Coca-Cola Company 2017 Form 10-K for the

Fiscal Year ended December 31, 2017, 47, https://www.coca-

colacompany.com/content/dam/journey/us/en/private/fileassets/pdf/2018/2017-10K.pdf. 21 Gertner, supra note 10, at 162.


sustained decline”22 due to increased awareness by consumers of the

health concerns related to obesity.

III. THE OBESITY EPIDEMIC

The obesity epidemic started in 1980 and the diabetes epidemic

started around 1990. According to the WHO, global obesity rates have

tripled since 1975.23 Obesity and being overweight are associated with

the top three leading risks for global deaths, which are heart disease,

stroke and pulmonary disease.24 At least 2.8 million adults worldwide

die each year as a result of being overweight or obese.25 A 2015 study

published in the New England Journal of Medicine found 54 out of

every 100,000 deaths worldwide are related to being overweight.26 In

the U.S. specifically, from 1980 to 2000, the obesity rate doubled from

less than 15% to 30%, and rose to approximately 40% in 2015-2016.27

During this same time period, U.S. rates of type 2 diabetes also

22 Margot Sanger-Katz, The Decline of “Big Soda,” N.Y. TIMES, Oct. 2, 2015,

https://www.nytimes.com/2015/10/04/upshot/soda-industry-struggles-as-consumer-tastes-

change.html. 23 Obesity and Overweight Key Facts, supra note 3. 24 World Health Org., The Top Ten Causes of Death, (May 24, 2018),

https://www.who.int/news-room/fact-sheets/detail/the-top-10-causes-of-death. 25 World Health Org., 10 Facts on Obesity, (Oct. 2017),

https://www.who.int/features/factfiles/obesity/en/. 26 Angela Chen, Deaths from Obesity are Rising Worldwide, THE VERGE, June 12, 2017,

https://www.theverge.com/2017/6/12/15781314/obesity-health-disability-global-survey-

data. 27 NESTLE, supra note 7, at 67; Robert Wood Johnson Foundation, State of Obesity: National

Obesity Rates and Trends, (2019), https://www.stateofobesity.org/obesity-rates-trends-

overview/.


increased.28

The Economist in its Special Report on Obesity wrote, “Far

from being a passive storage unit, fatty tissue secretes hormones,

including molecules that promote inflammation … Overloaded fat

tissue also pours out fatty acids into organs where they don’t belong,

particularly the liver. At its most extreme, the build-up of fat and

scarring in the liver can lead to liver failure.”29 In addition to higher

risks of stroke, heart attack, and pulmonary disease, obesity is also

associated with diabetes, gallbladder disease, hypertension, arthritis

and some cancers such as breast, ovarian, kidney and colon cancer.30

Non-alcoholic fatty-liver disease associated with obesity and

overweight may affect up to one-third of Americans.31 The McKinsey

Global Institute found the global economic costs associated with

obesity are $2 trillion annually.32 The medical costs for obesity and

consequential illnesses in the U.S. rose from an estimated $78.5 billion

in 1998, to $147 billion in 2008,33 and $149.4 billion in 2014.34

28 NESTLE, supra note 7, at 70. 29 Food for Thought, supra note 19, at 7. 30 Centers for Disease Control and Prevention, Adult Obesity Causes & Consequences, (Aug.

29, 2017), https://www.cdc.gov/obesity/adult/causes.html. 31 Food for Thought, supra note 19, at 7. 32 Richard Dobbs, Corinne Sawers et al, How the World Could Better Fight Obesity,

MCKINSEY AND CO., Nov. 2014, https://www.mckinsey.com/industries/healthcare-systems-

and-services/our-insights/how-the-world-could-better-fight-obesity. 33 Eric Finkelstein, Justin Trogdon, et al, Annual Medical Spending Attributable To Obesity:

Payer-And Service-Specific Estimates, 28 HEALTH AFFAIRS No. 5, (Sept./Oct. 2009)

(online) https://www.healthaffairs.org/doi/10.1377/hlthaff.28.5.w822.


Obesity is a complex health issue caused by a combination of

contributing factors, including individual behavior. According to the

Centers for Disease Control (“CDC”), the individual’s “balance of the

number of calories consumed from foods and beverages with the

number of calories the body uses for activity plays a role in preventing

excess weight gain.”35 The WHO is more conclusive, stating that the

“fundamental cause of obesity and overweight is an energy imbalance

between calories consumed and calories expended. [emphasis

added].”36 Thus, a main cause of obesity is too little exercise combined

with too many calories. Too little exercise occurs because people are

sedentary at work and at home, drive or take mass transportation, walk

little, and live in urban neighborhoods designed for automobile

transport, not for walking or bicycling.37 Too many calories are

consumed because people eat too much and eat the wrong types of

foods, mainly junk food and fast food, as opposed to fruits, vegetables,

34 Kim D. Kim & Basu Anirban, Systematic Review: Estimating the Medical Care Costs of

Obesity in the United States: Systematic Review, Meta-Analysis, and Empirical Analysis,

19 VALUE IN HEALTH 602, 602 (July-Aug. 2016),

https://www.ncbi.nlm.nih.gov/pubmed/27565277. 35 Adult Obesity Causes and Consequences, supra note 30. 36 Obesity and Overweight Key Facts, supra note 3. 37 See generally, Peter James, et al., Urban Sprawl, Physical Activity, and Body Mass Index:

Nurses’ Health Study and Nurses’ Health Study II, 103 J. OF PUB. HEALTH No. 2, 369

(2013); Beth Ann Griffin, et al., The Relationship Between Urban Sprawl and Coronary

Heart Disease in Women, 20 HEALTH & PLACE 51 (2013); Jordan A. Carlson, et al.,

Interactions Between Psychosocial and Built Environment Factors in Explaining Older

Adults’ Physical Activity, 53 PREVENTIVE MED. 68 (2012); Frances Garden & Bin Jalaludin,

Impact of Urban Sprawl on Overweight, Obesity, and Physical Activity in Sydney,

Australia, 86 J. OF URB. HEALTH No. 1, 19 (2008). But see, J. Feng, et al., The Built

Environment And Obesity: A Systematic Review Of The Epidemiologic Evidence, 16

HEALTH PLACE 175 (2010); Russell Lopez & H. Patricia Hynes, Obesity, Physical Activity,

and the Urban Environment: Public Health Research Needs, 5 ENVIRN’L HEALTH, 25

(2006), http://www.ncbi.nlm.nih.gov/pmc/articles/PMC1586006/.


lean meats and whole grains. Junk and fast “foods take less energy to

break down and finely milled grains can be digested more completely,

so the body absorbs more calories.” 38 Many of the junk food calories

in today’s diet come from sugary soft drinks. In 2017, the CDC

published a survey of high school students. At that time, 14.8% of high

school students were obese and 15.6% were overweight, according to

the CDC’s Youth Risk Behavior Survey. In the survey, 5.6% said they

did not eat fruit or drink 100% fruit juices during the seven days

before the survey, and 7.2% did not eat vegetables during the seven

days before the survey. Meanwhile, 18.7% drank at least one can,

bottle or glass of soda each day, and 7.1% drank a can, bottle, or glass

of soda three or more times per day during the seven days before the

survey.39

The consumption of sugary soft drinks has definitively been

associated with the rising rates of obesity. As mentioned earlier, a 12-

ounce can of regular Coca-Cola contains 39 grams of sugar (in the

form of high fructose corn syrup) which is the equivalent of 10

teaspoons.40 The size of soda servings has been increasing: Coca-Cola

was originally sold in 6.5-ounce bottles for many decades41 but in

1990, fountain drink sizes in America doubled and in 1994 bottle sizes

38 Food for Thought, supra note 19, at 4. 39 Centers for Disease Control and Prevention, Division of Adolescent and School Health,

Youth Risk Behavior Surveillance System Interactive Data (June 20, 2018),

http://www.cdc.gov/healthyyouth/npao/data.htm. 40 NESTLE, supra note 7, at 12-13. 41 Id. at 38.


tripled as Coca-Cola introduced a 20-ounce plastic bottle, containing

65 grams of sugar or the equivalent of 16 teaspoons. At the same time,

rates of diabetes and obesity increased, with the CDC stating that 20%

of US adults were obese by 1999.42 Today, cans and bottles are

available in sizes from 7.5 ounces (25 grams of sugar or 6 teaspoons)

to 2 liter bottles (216 grams of sugar or 54 teaspoons).43 Association

does not prove causation; however, statistics do show that from 1980

to 2000, as the US obesity rate doubled from less than 15% to 30%

and rates of type 2 diabetes increased, production and consumption of

regular sugary sodas also increased from 27 gallons per capita per year

to greater than 40.44

Dietary guidelines for consumption of sugar and sugary soft

drinks have evolved over time, along with the obesity epidemic.

According to information from the US Department of Agriculture

(“USDA”) and the Health and Human Services Department (“HHA”),

in 1980, as the obesity epidemic was beginning, the official guideline

regarding sugar was simply to “Avoid too much sugar,” but by 1990,

as the rates of diabetes also rose, the guideline changed to “Use sugar

only in moderation.” In 2010, fat was added as a dietary culprit and

consumers were advised to actively reduce consumption of these

42 Claire Suddath, Coke is Ready to Talk About its Problem, BLOOMBERG BUSINESSWEEK, Aug.

10, 2014, at 41; NESTLE, supra note 7, at 39. 43 NESTLE, supra note 7, at 39. 44 Id. at 67-70. Consumption of sugar and sweeteners regardless of source increased

significant over the years, on average at 108.4 pounds per person in 1940, to 132.3 pounds

per person in 1970, to 140.7 pounds per person in 2010. ROBERT J. GORDON, THE RISE AND

FALL OF AMERICAN GROWTH 338 (2016). In addition, “After a century of stability between

1870 and 1970, total daily calories of food consumption after 1970 increased by more than

20 percent, enough to add fifty pounds to the average adult each year,” with a large part of

this due to fats and cereals and flours. Id. at 345-346.


items, with the guidelines stating, “Reduce the intake of calories from

solid fats and added sugars (SoFAS).”45 In 1980, the USDA and HHA

advice regarding soft drinks specifically was to “Eat less of foods

containing these sugars, such as candy, soft drinks….” In 1990, there

was no specific mention or caution about soft drinks. In 2000, with the

obesity epidemic in full-swing, the advice was strengthened to “Limit

your use of these beverages,” and in 2010 the recommendation was

“Drink few or no regular sodas.”46 Federal guidelines in the US

recommend that children and teenagers consume less than 10% of their

total calories from added sugars, but current consumption rates are

17%, with almost half of that percent from sugary sodas, sports drinks

and fruit-flavored beverages.47 Internationally, in 2015, the WHO

published guidelines stating adults and children should restrict their

sugar intake to less than 10% of daily calories.48

Other less-obvious factors also may be contributing to the

epidemic. Genetics is believed to play a role in obesity because genetic

variations impact how people respond to physical inactivity and

consumption of high-calorie foods. Scientists have identified variants

in certain genes that increase hunger and overall caloric intake, which

45 NESTLE, supra note 7, at 56. 46 Id. at 56. 47 Andrew Jacobs, Two Top Medical Groups Call for Soda Taxes and Advertising Curbs on

Sugary Drinks, N.Y. TIMES, Mar. 25, 2019,

https://www.nytimes.com/2019/03/25/health/soda-taxes-sugary-drinks-advertising.html. 48 Press Release, WORLD HEALTH ORG., WHO Calls on Countries to Reduce Sugars Intake

Among Adults and Children, (Mar. 4, 2015),

https://www.who.int/mediacentre/news/releases/2015/sugar-guideline/en/.


then impacts weight levels and obesity. Use of steroids and

antidepressants may also be associated with obesity.49 Bisphenol A

(BPA) may be a contributing cause; according to a study in the

Journal of the American Medical Association, about 22 percent of the

children with highest levels of BPA were obese, compared to just 10

percent of kids with the lowest levels.50 Lack of sleep – prevalent in

the US – is also a factor in weight control.51 Antibiotics overuse may

be another factor.52

Public awareness of the risks and concerns of obesity has

increased, resulting in a rise in exercise, a reduction in calories

consumed, and a reduction in the amount of soda being consumed by

25% since the late 1990s. The consumer demand for beverages has

also shifted. Instead of buying soft drinks, consumers are buying teas,

juices, energy drinks and bottled water. In the decade from 2003 to

2013, sports drink consumption in the U.S. increased by approximately

45%, bottled water by approximately 35%, and soft drink consumption

declined by 20%.53 Historically, in the 1970s, the average American

49 Adult Obesity Causes and Consequences, supra note 30. 50 Mike Stobbe, Study Suggests Tie Between BPA and Child Obesity, YAHOO! FIN., Sept. 18,

2012, https://finance.yahoo.com/news/study-suggests-tie-between-bpa-child-obesity-

141219205.html. 51 Nicole Ostrow, Lack of Sleep May Lead to Obesity, Harvard Study Suggests, BLOOMBERG,

April 11, 2012, http://www.bloomberg.com/news/2012-04-11/lack-of-sleep-may-lead-to-

obesity-harvard-study-suggests.html; Waking Up to Sleep’s Role in Weight Control, HARV.

SCH. OF PUB. HEALTH, http://www.hsph.harvard.edu/obesity-prevention-source/obesity-

causes/sleep-and-obesity/. 52 Michaeleen Doucleff, Could Antibiotics Be A Factor in Childhood Obesity?, NPR, Aug. 22,

2012, http://www.npr.org/blogs/health/2012/08/22/159743999/could-antibiotics-be-a-factor-

in-childhood-obesity. See also, Ellen Black, Obesity: The “Market” May Hold the Solution,

87 UMKC L. Rev. 269, 269-273 (Winter, 2019); Gertner, supra 10, at 161. 53 The authors discuss later the research on whether soda taxes may be a cause of this


consumer doubled the amount of soda consumed, and by the 1980s,

more soda was being consumed than water. That trend stopped. The

average American now drinks about 450 cans of soda per year, the

same amount approximately as in 1986.54 In a comparison of North

American unit case volume sales from 2015 to 2017, even Diet Coke

experienced a 10% decline in sales.55 As a result, new cases of

diabetes in the U.S. have started to decline. There were 1.4 million

new cases in 2014, but there had been 1.7 million in 2008.56

Unlike PepsiCo which has the Frito-Lay food business to offset

declining beverage sales, Coke’s business is beverages: 74% of Coke’s

business worldwide and 68% in the United States derives from soda

sales of all types. As sales continue to decline, so does Coke’s

revenue. Coke’s annual reports list “obesity and other health concerns”

as a major risk to the company.57 In its 2018 Annual Report to

Shareholders on Form 10-K, Coke listed the impact of obesity on

demand for its products as its number one risk factor, stating:

There is growing concern among consumers, public health

professionals and government agencies about the health problems

associated with obesity. Increasing public concern about obesity; other

reduction, but there seems to be a collective reduced demand due to obesity awareness itself.

For this paper, the direct cause is not important. 54 Suddath, supra note 42, at 40. 55 2017 Form 10-K, supra note 20, at 46. 56 Sabrina Tavernise, In Major Shift, Diabetes Cases Start to Decline, N.Y. TIMES, Dec. 1,

2015, at A18. 57 Suddath, supra note 42, at 42.


health-related public concerns surrounding consumption of sugar-

sweetened beverages; possible new or increased taxes on sugar-

sweetened beverages by government entities to reduce consumption or

to raise revenue…could adversely affect our profitability.58

Coke specifically referenced the imposition of sugar taxes as a

business concern related to obesity.

IV. COKE FACES A CHANGING REGULATORY

AND LEGAL ENVIRONMENT

The U.S. government has a 100-year history of taxing soft

drinks and other foods and beverages to deter consumption of luxury

and extravagant goods and to raise revenue during war times. These

sin taxes began in World War I, and continued by various revenue acts

through the 1930s.59 The states also have taxed foods and beverages in

the past, particularly during the Great Depression, but usually

exempted necessities such as real food. However, “soft drinks, diluted

fruit juices and often candy” did not count as real food and so were not

exempted from these taxes. The states’ goal was also to raise revenue,

because of the collapse of property tax revenues due to the Great

Depression.60 Some snack taxes persisted into the 1990’s.61

58 2018 Form 10-K, supra note 10, at 9. 59 Weny Sheu, The Evolution of the Modern Snack Tax Bill: From World War I to the War

Against Obesity, 5-9 (2006), https://dash.harvard.edu/handle/1/8846753. See also, Merav W.

Efrat & Rafael Efrat, Tax Policy and the Obesity Epidemic, 25 J.L. & HEALTH 233, 252-253

(2012). 60 Sheu, supra note 59, at 8-11. 61 Id. at 12-17. Michael F. Jacobson & Kelly D. Brownell, Small Taxes on Soft Drinks and

Snack Foods to Promote Health, 90 AM. J. PUB. HEALTH 854, 856 (2000) (notably, South


Starting in 2012, numerous cities and states began

implementing measures, primarily taxes on soda sales, in an effort to

raise money to combat obesity and raise revenue in general. The

governments’ logic was that taxing sugar-sweetened sodas would

discourage consumers from purchasing these beverages, resulting in

lower consumption of such beverages and an overall decrease in

obesity rates.62

A typical and suitable business response to changes in laws and

regulations that adversely affect the business is to challenge those

changes in multiple ways, including lawsuits, legislative initiatives and

lobbying. Coke engaged in these activities directly and through its

trade association, the ABA. The use of trade associations moves the

focus away from one company, allows companies to work as an

industry to advance common objectives, even as companies compete

against each other, and promotes positions that keep the company’s

name and brand out of the public spotlight. The beverage industry

typically aggressively challenges soda taxes, arguing, among other

things, that “soda taxes unfairly burden the poor, cause higher

unemployment by squeezing industry sales, and fail to achieve their

policy goal: reducing obesity.”63

Carolina enacted a tax in 1925). 62 Black, supra note 52, at 280. 63 Andrew Jacobs & Matt Richtel, After Drug Wars, A Dangerous Battle over Soda, N.Y.

TIMES, Nov. 14, 2017, at A1, A8.


A. SODA TAX INITIATIVES IN THE UNITED STATES

AND COKE’S RESPONSES.

One of the earlier initiatives to curb consumption of sugary soft

drinks occurred in 2012 in New York City. Led by Mayor Michael

Bloomberg, the city first considered a direct tax on soda but this was

blocked by the food and beverage industry in state legislature.64 The

city then barred supersized sodas in restaurants and food

establishments, restricting the size to 16 ounces or less.65 The city’s

reasoning was based on behavioral studies showing that people tend to

eat (and drink) the quantities put before them. Also, people

underestimate the caloric density of soft drinks.66 Limiting sizes is the

“nudge” concept articulated and promoted by law and economics

professor Cass Sunstein, in his book Nudge, that government can

encourage better personal habits by nudging people towards better

choices, without actually restricting choices.67 (The use of taxes,

among various techniques, to alter people’s behaviors in the name of

social welfare is discussed in section 0.) Supporters of the ban argued

that this action was not a total ban of soft drinks, but rather a limitation

64 Brian Galle, Tax, Command . . . or Nudge?: Evaluating the New Regulation, 92 TEX. L.

REV. 837, 837-838 (Mar. 2014). 65 Michael Grynbaum, Health Panel Approves Restriction on Large Sugary Drinks, N.Y.

TIMES, Sept. 13, 2012, http://www.nytimes.com/2012/09/14/nyregion/health-board-

approves-bloombergs-soda-ban.html. 66 Sugar Warning for “Healthy” Soft Drinks, BBC NEWS, April 17, 2012,

https://www.bbc.com/news/health-17731052; Rebecca Franckle, Jason Block, & Christina

Roberto, Calorie Underestimation When Buying High-Calorie Beverages in Fast-Food

Contexts, 106 AMER. J. OF PUB. HEALTH No. 7, 1254 (2016). 67 RICHARD THALER & CASS SUNSTEIN, NUDGE: IMPROVING DECISIONS ABOUT HEALTH,

WEALTH AND HAPPINESS 101, 247-249, 251 (2009). See also, Galle, supra note 64, at 837-

884, arguing that nudges provide greater incentives than sin taxes, other Pigouvian taxes and

subsidies in many cases.

http://www.nytimes.com/2012/09/14/nyregion/health-board-approves-bloombergs-soda-ban.html

http://www.nytimes.com/2012/09/14/nyregion/health-board-approves-bloombergs-soda-ban.html


in serving size only, and that such a governmental nudge, if it resulted

in lowering consumption and obesity rates, was worth the minor

limitation of consumer choice.68 The beverage industry, including

Coke, immediately began a variety of tactics to resist the city’s

initiative to discourage soda consumption. The ABA hired a public

relations firm to create an activist group to oppose the ban.69 The

public relations firm formed “New Yorkers for Beverage Choices,”

which was promoted as a “grassroots coalition” of citizens, business

and community organizations advocating for consumer choice in

beverage sizes. (As Drutman says, “Modern lobbying strategies

increasingly have a kind of everywhere-and-everything-at-once

approach that includes large-scale coalition building, grassroots

activity, a comprehensive media plan, and a broad shaping of the

‘intellectual environment’ ….”70) Most members were not aware this

organization was the creation of the ABA and its public relation’s

firm. The public relations campaign points included referring to nanny

states and raising concerns about government limits on personal

freedom. The firm ran ads in The New York Times showing Mayor

Bloomberg in a dress with the caption “New Yorkers need a Mayor,

not a Nanny.”71 Coke engaged in its own direct advertising efforts too,

focusing on the fact that sugary drinks can be part of a person’s diet if

consumed in balance with calories expended in exercise, including an

68 Galle, supra note 64, at 288. 69 NESTLE, supra note 7 at 336. The ABA hired the public relations firm of Goddard Claussen

Public Affairs. Id. 70 LEE DRUTMAN, THE BUSINESS OF AMERICA IS LOBBYING 25-26 (2015). 71 NESTLE, supra note 7, at 350-351.


ad in The New York Times72 and advertisements on national television

showing thin, healthy people drinking Coca-Cola and exercising, along

with the on-screen statement, “If you eat and drink more calories than

you burn off, then you’ll gain weight.”73 Critics including The

Financial Times criticized Coke as disingenuous for trying to portray

itself as having a role in the prevention of obesity, comparing it to the

tobacco companies’ ads in the 1950s.74

After the New York law limiting soda sizes was officially

approved in September 2012, the ABA turned to litigation tactics and

sued Mayor Bloomberg and New York City. The ABA obtained an

injunction stopping the limitation-size law on March 11, 2013, the day

before it was supposed to be implemented.75 Mayor Bloomberg and

New York City appealed, but the New York Court of Appeals affirmed

the prior court’s decision that the city exceeded its regulatory authority

in imposing the size ban.76 According to OpenSecrets.org, in 2012,

Coke spent $5,180,020 in overall lobbying efforts, including efforts to

72 Id. at 351. The New York Times ad stated “Everything in moderation…. By promoting

balanced diets and active lifestyles, we can make a positive difference.” Id. 73 Alan Rapapport, Coke: Out for the Calorie Count, FIN. TIMES, Jan. 25, 2013,

https://www.ft.com/content/cbd21108-66c1-11e2-a83f-00144feab49a. 74 Id. 75 Leon Stafford, First Big U.S. City Backs Tax on Sugary Drinks, ATL. J.-CONST., June 17,

2016, at A6. NESTLE, supra note 7, at 353. 76 Michael M. Grynbaum, New York’s Ban on Big Sodas is Rejected by Final Court, N.Y.

TIMES, June 26, 2014, https://www.nytimes.com/2014/06/27/nyregion/city-loses-final-

appeal-on-limiting-sales-of-large-sodas.html; New York Statewide Coal. of Hispanic

Chambers of Commerce v. New York City Dep't of Health & Mental Hygiene, 23 N.Y.3d

681, 16 N.E.3d 538 (2014). The court held that the Board of Health regulation infringed on

the legislative jurisdiction of the City Council of New York, and that whether to restrict size

for public health reasons was a matter of policy making, not regulation, thus exceeding the

Board’s authority. By this reasoning, if the City Council had made the policy decision, the

ban might well have been legal.


fight the New York City initiative, and in 2013, Coke spent the highest

amount on overall lobbying of any other food and beverage company,

$5,981,527, which exceeded even the $1,240,000 spent by the ABA

that year.77

Legislators then turned to taxing sugar, instead of limiting

serving sizes. Such sin taxes are intended to deter the harmful behavior

and generate revenue for governments. Such taxes have been utilized

effectively in the past against tobacco and alcohol, and economists

have found that a 1% increase in price due to such a tax correlated

with a .05% reduction in consumption of alcohol and tobacco.78 One

study suggested even a penny tax could reduce consumption of sodas

by 8 to 10%.79 Soda tax legislation initially had been proposed at the

federal level. Congress considered a tax on sodas in 2009.80 In that

year, Coke spent $9.4 million in lobbying expenses and the ABA spent

77 The Center for Responsive Politics, 2012 Lobbying Coca-Cola Co.,

https://www.opensecrets.org/lobby/clientsum.php?id=D000000212&year=2012; The Center

for Responsive Politics, 2013 Lobbying Coca-Cola Co.,


for Responsive Politics, 2013 Lobbying American Beverage Association,

https://www.opensecrets.org/lobby/clientsum.php?id=D000000491&year=2013. 78 The Taxes of Sin, THE ECONOMIST, July 28, 2018, at 44. 79 Taxing Soda to Slow the Obesity Epidemic, HARV. SCH. OF PUB. HEALTH (October 2009),

https://www.hsph.harvard.edu/nutritionsource/2009/10/15/taxing-soda-to-slow-the-obesity-

epidemic/. 80 Precedent existed for such federal action. Congress had actually implemented a 10% tax on

sodas before, during 1918-1921, to raise revenue during World War I. NESTLE, supra note 7,

at 362. The soda industry was so upset by this tax that they formed the trade association that

ultimately became the American Beverage Association. Id.


$19 million.81 The measure did not pass. In 2014, Congress tried to

enact the Sugar-Sweetened Beverage Tax Act to raise an estimated

$10 billion in revenue to prevent and treat diseases related to obesity.82

This did not pass either. According to OpenSecrets.org, in 2014, Coke

spent over $9 million in total lobbying efforts, including challenging

the Congressional tax; the ABA spent an additional $1,180,000.83.

With no federal law in place, municipalities began to move

forward on their own. In 2014, (the same year the federal Sugar-

Sweetened Beverage Tax Act failed), the city of Berkeley, population

of approximately 120,000, became the first city to pass a soda tax, at a

penny-per-ounce on sugar-sweetened drinks which impacted soft

drinks, sweetened teas and fruit drinks, energy drinks and caffeinated

drinks, but did not apply to diet drinks that use sugar substitutes.84

Berkeley promised to use the funds for community gardens and similar

health programs.85 Again, Coke and the beverage industry fought the

tax, spending $2 million on the effort, but the vote was 76% in favor,

due to the efforts of a coalition of the local NAACP, Latinos Unidos,

teachers unions and other community groups who campaigned for the

measure due to increasing public awareness of the beverage industry’s

81 Id. at 317. 82 Id. at 383. The bill was introduced by Rosa De Lauro (D-Conn.). 83 The Center for Responsive Politics, 2014 Lobbying Coca-Cola Co.,



https://www.opensecrets.org/lobby/clientsum.php?id=D000000491&year=2014. 84 Yasmin Anwar, Soda Tax Linked to Drop in Sugary Beverage Drinking in Berkeley, Aug.

23, 2016, http://news.berkeley.edu/2016/08/23/sodadrinking/; Margot Sanger-Katz, Yes,

Soda Taxes Do Seem to Discourage Soda Drinking, N.Y. TIMES, Oct. 13, 2015, at A3. 85 Margot Sanger-Katz, Pointing to Cash, Not Health, to Make a Soda Tax Palatable, N.Y.

TIMES, April 4, 2016, at A3.


role in fighting the tax.86 Advocates declared the tax a success. A 2016

University of California-Berkeley study surveyed 2,500 residents of

low-income neighborhoods and concluded the tax reduced

consumption of soda and other sugary beverages 21%.87 The study

could not determine conclusively if the decrease was due to the price

increase or to greater public awareness of the health issues associated

with soft drink consumption.88 Berkeley residents also reported a 63%

increase in consumption of water, compared to a 19% increase in San

Francisco and Oakland, although those cities reported a 4% increase in

soda consumption, which could indicate consumers were simply going

outside of Berkeley to purchase sugary drinks.89 Data from 2016 show

that the tax raised $1.5 million in that year for public health and

nutrition programs.90

In 2013, California proposed a state-wide soda tax of a penny

per ounce, but it failed to advance in the legislature.91 The state re-

86 Lappe, supra note 2. 87Jennifer Falbe, Hannah Thompson, et al. Impact of The Berkeley Excise Tax On Sugar-

Sweetened Beverage Consumption, 106 AMER. J. OF PUBLIC HEALTH, 1865 (2016),

https://ajph.aphapublications.org/doi/full/10.2105/AJPH.2016.303362. 88 Anwar, supra note 84; Margot Sanger-Katz, Faced with a New Tax, Berkeley Drinks Less

Soda, N.Y. TIMES, Aug. 25, 2016, at A3. 89 A 2018 study by researchers at Duke University concluded that there is only ‘limited”

evidence to support reduced purchases of soda as a result of the Berkeley tax and further

established that consumers were indeed purchasing soda outside the Berkeley tax zone.

Black, supra note 52, at 281. 90 Lappe, supra note 2. 91 Melanie Mason, Healthcare Groups Want California Voters to Tax Soda, L.A. TIMES, July

2, 2018, https://www.latimes.com/politics/la-pol-ca-soda-tax-initiative-20180702-


introduced two successive soda tax bills of a 2-cent per ounce tax in

2015 and 2016, and this time specifically added that the funds raised

would be used for obesity and diabetes clinics. These initiatives also

stalled in the legislature. From the start of 2015, Coke, PepsiCo and

the California Nevada Beverage Association spent over $413,000 on

lobbying to fight the state proposals.92

Overall, Coke spent more than $8 million on total lobbying

efforts in 2015, according to OpenSecrets.org; the ABA spent

1,380,000.93

In June 2016, Philadelphia, with a population of about 1.6

million, became the first major US city to pass a soda tax, at 1.5 cents

per ounce, to be levied on distributors and to apply to all sugary or

story.html. See also, Carolyn Jones, More Soda Tax Measures May Be Coming, SFGATE,

Nov. 29, 2012, http://www.sfgate.com/bayarea/article/More-soda-tax-measures-may-be-

coming-4079117.php/. 92 KQED News Staff, Statewide Soda Tax Bill Dead for the Year, KQED NEWS, April 13,

2016, https://ww2.kqed.org/stateofhealth/2016/04/13/statewide-soda-tax-bill-dead-for-the-

year/. In this same time frame, on July 9, 2015, San Francisco passed initiatives declaring

ads for sugary soft drinks must include the warning label: “WARNING: Drinking beverages

with added sugar(s) contributes to obesity, diabetes, and tooth decay. This is a message from

the City and County of San Francisco.” Katy Steinmetz, San Francisco Approves Warning

Label for Sugary Drink Ads, TIME, June 10, 2015, http://time.com/3915485/san-francisco-

soda-warning-label. However, this initiative was never implemented because the Ninth

Circuit Court of Appeals determined, among other things, that the warning “unduly burdens

and chills protected commercial speech.” Am. Beverage Ass’n v. City & Cty. of S.F., F.3d

884, 888 (9th Cir. 2017); Galle, supra note 64, at 287. 93 The Center for Responsive Politics, 2015 Lobbying Coca-Cola Co.,



https://www.opensecrets.org/lobby/clientsum.php?id=D000000491&year=2015.


artificially sweetened drinks sold by distributors in Philadelphia.94

Unlike in Berkeley, the Philadelphia tax was levied on both regular

and diet sodas, whether sweetened with sugars or non-caloric

sweeteners. The tax was levied directly on the distributors and equated

to a price increase of 60 cents for a 20-ounce bottle of soda; however,

the distributors passed an average of 97% of the cost on to consumers

resulting in a 34% price increase on average.95 While Berkeley’s soda

tax was marketed as a means to change poor health habits, the

Philadelphia City Council promoted their tax purely as a source of

general revenue that would raise more than $400 million over five

years to fund universal preschool and renovations to community assets

like parks and libraries.96 The soda industry argued the tax would not

be stable enough for items like preschool that require permanent,

predictable funding, and would disproportionately affect poorer

consumers.97 The ABA fought the initiative via lobbying, advertising,

and by funding the group “Philadelphians Against the Grocery Tax”

which used aggressive media campaigns to fight the tax.98 The ABA,

94 Stafford, supra note 75, at A1; Andrew Jacobs, Philadelphia’s Primary Will Decide Future

of Soda Tax, Though It’s Not on Ballot, N.Y. TIMES, May 21, 2019, at A16. 95 Sanger-Katz, Pointing to Cash, Not Health, to Make a Soda Tax Palatable, supra note 85, at

A3; Sachin Waikar, How to Design a Better Soda Tax, INSIGHTS STANFORD GRAD. SCH. OF

BUS., Mar. 22, 2019, https://www.gsb.stanford.edu/insights/how-design-better-soda-tax. 96 Sanger-Katz, Pointing to Cash, Not Health, to Make a Soda Tax Palatable, supra note 85, at

A1. As of May 2019, funds from Philadelphia soda taxes have been used to add 4,000

prekindergarten slots and build 12 new community schools. Jacobs, Philadelphia’s Primary

Will Decide Future of Soda Tax, Though It’s Not on Ballot, supra note 94. 97 Sanger-Katz, Pointing to Cash, Not Health, to Make a Soda Tax Palatable, supra note 85, at

A3. 98 Lappe, supra note 2.


local grocery owners and the Teamsters union together spend $10.6

million in the process of fighting the initiative in 2016, compared to $2

million spent by supporters of the tax, including former New York

Mayor Michael Bloomberg.99

The ABA sued Philadelphia, calling its tax illegal. The ABA

stated the tax “is a regressive tax that unfairly singles out beverages –

including low-and no-calorie choices. But most importantly, it is

against the law. So we will side with the majority of the people of

Philadelphia who oppose this tax and take legal action to stop it.”100

The trial court ruled against the ABA. The ABA appealed, but in July

2018, the Pennsylvania Supreme Court affirmed the trial court’s

decision in a 4-2 ruling.101

Soda tax advocates hailed the Philadelphia tax as a success.

One study showed a 40% decrease in soda consumption in the area

after the tax was implemented, and a 2019 study in the Journal of the

American Medical Association that compared soda sales in the year

before and after the tax showed a 38% drop in soda sales in

Philadelphia.102 Meanwhile, the impact of the tax had a negative effect

99 Holly Otterbein, The Beverage Lobby Spent $10.6 Million to Kill the Soda Tax – and

Failed, PHIL. MAG, Aug. 2, 2016, https://www.phillymag.com/citified/2016/08/02/soda-tax-

spending-lobbying/; Jacobs, Philadelphia’s Primary Will Decide Future of Soda Tax,

Though It’s Not on Ballot, supra note 94. 100 Stafford, supra note 75, at A6. 101 Pennsylvania Supreme Court Upholds Philadelphia’s Beverage Tax, GRANT THORNTON,

Aug. 16, 2018, https://www.grantthornton.com/library/alerts/tax/2018/SALT/P-T/PA-

supreme-court-upholds-Philadelphia-beverage-tax-08-16.aspx. 102 Andrew Jacobs, When Yes Really Means No to a Tax on Sugary Drinks, N.Y. TIMES, Nov.

3, 2018, at B4; Andrew Jacobs, Philadelphia’s Primary Will Decide Future of Soda Tax,

Though It’s Not on Ballot, supra note 94. See also, Christina Roberto, Hannah Lawman, et

al, Association of a Beverage Tax on Sugar-Sweetened and Artificially Sweetened Beverages


on soda sales for Coke and other soda companies. A 2017 study of the

impact of the Philadelphia tax shows retailers experienced a 46%

decrease in demand for soda.103 Pepsi even stopped selling 2-liter

bottles and 12-packs in the city.104 While sales of sugary sodas

dropped in Philadelphia during the first five months of the new law’s

implementation, there was a parallel increase in purchases outside the

Philadelphia city limits.105 The 2017 study proposes that consumers in

some cases switched to water or other untaxed beverages, but in other

cases, simply went to other counties to purchase the drinks at a lower

with Changes in Beverage Prices and Sales at Chain Retailers in a Large Urban Setting,

321 J. OF AM. MED. ASSOC.1799, 1806 (May 14, 2019),

https://jamanetwork.com/journals/jama/fullarticle/2733208?guestAccessKey=86610f39-

a0eb-46d4-a30a-

3ddef0036408&utm_source=For_The_Media&utm_medium=referral&utm_c

ampaign=ftm_links&utm_content=tfl&utm_term=051419. 103 Waikar, supra note 95. For example, the ABA published a study with Oxford Economics,

presenting data to support a 29% decrease in bottler sales in Philadelphia for the first three

months in 2017 in comparison to data for the first three months in 2016, before the tax was

effective. The study also showed a 26% increase in bottler sales in the region surrounding

Philadelphia during the same time period, and attributes that increase to consumers traveling

outside the tax zone to purchase sugary drinks. The study also concludes that employment in

bottling, beverage trade and transport and grocery retail decreased by 1,192 workers as a

result of the tax, a corresponding loss of local tax revenue of $4.5 million. The Economic

Impact of Philadelphia’s Beverage Tax, AM. BEV. ASS’N AND OXFORD ECON., Dec. 2017, at

4-5, https://www.ameribev.org/files/resources/oe-economic-impact-study.pdf. 104 Wan, Watson, Arthur, supra note 1. Pepsi’s CEO Indra Nooyi has stated that she opposes

soda taxes because they are “regressive,” “unfairly target one category or industry,” and are

“more revenue generation-focused rather than health-focused.” Id. 105 Id. See also, Black, supra note 52, at 281-282, noting that in its first year, tax revenues

were nearly 15% below estimated amounts, negatively impacting the programs funded by

the tax.


price.106 Coke’s North American President Sandy Douglas told

delegates at an industry conference in 2017 that the “Philadelphia tax

had been a ‘complete disaster,’ which had cost jobs and ‘materially

reduced our business.’”107

After Philadelphia, other cities imposed taxes in quick

succession: a penny-per-ounce soda tax in the California cities of San

Francisco, Oakland, and Albany in 2016 (predicted to raise soda prices

by 67 cents on a two-liter bottle and $1.44 on a 12-pack),108 and a 2

cents per ounce tax in Boulder, Colorado. The San Francisco, Oakland

and Albany taxes were each levied on distributors of sugar-sweetened

beverages, with the revenue to be used for health programs.109 The

Boulder tax revenue is also to be spent on health and wellness

programs, particularly those related to obesity.110 The beverage

industry again spent millions on advertising campaigns against the

taxes, arguing they were “grocery taxes” that would disproportionately

impact the poor and unfairly target one item when it is the overall

calorie consumption from all foods that matters most. The industry

also argued that obesity rates continue to rise even as soda

consumption is declining.111 Spending by both proponents and

106 Waikar, supra note 95. 107 Wan, Watson, Arthur, supra note 1. 108 Margot Sanger-Katz, A One-Cent Soda Tax Gets Expensive in California, N.Y. TIMES,

Nov. 8, 2016, at A3. 109 Treasurer and Tax Collector, City and County of San Francisco, Sugary Drinks Tax,

https://sftreasurer.org/sugary-drinks-tax; Oakland Food Policy Council, An Overview of the

Oakland Soda Tax, https://www.oaklandsodataxnews.org/sodataxbasics; Albany, Dept. of

Finance and Administrative Services, Sugar-Sweetened Beverage Tax,

https://www.albanyca.org/departments/finance/sugar-sweetened-beverage-tax. 110 City of Boulder, Sugar-Sweetened Beverage Tax, https://bouldercolorado.gov/tax-

license/finance-sugar-sweetened-beverage-tax. 111 Anahad O’Connor, University’s Sugary Soda Ban Comes Amid Policy Battle, ATL. J.-


opponents of the taxes exceeded $50 million, with the beverage

industry outspending proponents by 3 to 2. Coke itself spent almost $8

million on overall lobbying in 2016, according to OpenSecrets.org;

the ABA spent $1,160,000.112 The taxes passed in all three cities.

In June 2017, the Seattle City Council imposed a 1.75 cents per

ounce tax on distributors of sugary drinks (excluding diet drinks), to be

used for health programs, although, similar to Philadelphia, the mayor

originally proposed to use the revenue to fund education programs for

low income children.113 The tax, the cost of which has mostly been

passed on to consumers, raised over $16 million in its first nine

months of being effective.114 Revenue has been used to improve access

to healthier foods for low-income families, such as vouchers to be used

at farmers’ markets.115

In addition to cities, a few medical centers have banned sugary

CONST., Nov. 13, 2016, at A12. 112 Margot Sanger-Katz, A One-Cent Soda Tax Gets Expensive in California, supra note 108;

The Center for Responsive Politics, 2016 Lobbying Coca-Cola Co.,



https://www.opensecrets.org/lobby/clientsum.php?id=D000000491&year=2016. 113 Daniel Beekman, Seattle Passes Tax on Sugary Drinks, ATL. J.-CONST., June 7, 2017, at

A13. 114 Daniel Beekman, Seattle’s Soda-Tax Collections Top $16 million in 9 Months, Surpass

First-Year Estimate, SEATTLE TIMES, Dec. 20, 2018, https://www.seattletimes.com/seattle-

news/politics/seattles-soda-tax-collections-top-16-million-in-9-months-surpass-first-year-

estimate/. 115 Jacobs, When Yes Really Means No to a Tax on Sugary Drinks, supra note 102, at B4.


drinks. In 2015, the University of California, San Francisco, medical

center removed all drinks with added sugars from its campus of more

than 24,000 employees, including from all stores and vending

machines on campus. Early surveys of 2,500 employees indicate that

soda consumption fell by 25%. Similarly, the Cleveland Clinic in

Ohio, the University of Michigan Health System, and about 30 other

medical centers have implemented such bans.116

The cumulative effect of Coke’s and the beverage industry’s

lobbying, litigation and media efforts to oppose soda taxes began to

bear results. While Seattle was passing its soda tax, in Santa Fe, New

Mexico, voters rejected a soda tax in May 2017, and in Cook County,

Illinois (Chicago), county commissioners repealed their soda tax of 1-

cent-per-ounce two months after it had been enacted.117 The beverage

industry spent additional millions in TV and advertisements fighting

the Cook County tax after its implementation, in a campaign called

“Can the Tax.” The campaign especially criticized the fact the tax

revenue here was being used to address budget deficits, not public

health or even pre-K funding. One commissioner “acknowledged that

the beverage industry used its financial power to shape public opinion

before supporters of the tax were able to craft their own message for

public debate.”118 The ABA has been successful in defeating soda

116 O’Connor, University’s Sugary Soda Ban Comes Amid Policy Battle, supra note 111, at

A12. 117 Wan, Watson, Arthur, supra note 1; American Beverage Association & Oxford

Economics, The Economic Impact of Philadelphia’s Beverage Tax, (Dec. 2017), at 6,

https://www.ameribev.org/files/resources/oe-economic-impact-study.pdf. The tax was

effective in August 2017, repealed in October 2017, and abolished on Dec. 1 2017. Id. 118 Lappe, supra note 2. See also, Black, supra note 52, at 282. Vermont has considered a tax

as well.


taxes in more than thirty states and cities.119

In 2017, the beverage industry introduced a different tactic in

the fight, going directly to the legislatures to draft pre-emptive

statewide legislation to preclude cities from enacting future taxes on

foods, including sodas. This is part of the lobbying that businesses

engage in, and every business and industry must make a strategic

decision whether to lobby to achieve business goals or protect existing

business goals and practices.120 Lobbying by drafting legislation is a

common strategy,121 and has been used in a variety of other issues

such as fracking, minimum wages, gun ordinances, and bathroom

usage: “Recent preemption efforts can be understood, at one level, as

part of longstanding campaigns waged by industry groups hoping to

stop or limit progressive local policies in order to create a friendlier

business environment for themselves.122 Most of the proposed

119 Stafford, supra note 75, at A6. 120 FRANK BAUMGARTNER, LOBBYING AND POLICY CHANGE: WHO WINS, WHO LOSES, AND

WHY 113 (2009); DRUTMAN, supra note 70, at 25-28; LAWRENCE LESSIG, REPUBLIC LOST

136-138 (2015). 121 DRUTMAN, supra note 70, at 40-41; How a Bill Really Becomes a Law, BLOOMBERG

BUSINESSWEEK, Aug. 1 – 7, 2011, at 30. The article quotes Bob Edgar of Common Cause,

“This is just another hidden way for corporations to buy their way into the legislative

process.” Brendan Greeley & Alison Fitzgerald, Pssst … Wanna Buy A Law? BLOOMBERG

BUSINESSWEEK, Dec. 5, 2011, at 65, 70. 122 Industry groups and trade associations first began pressuring state legislatures to rein in

their cities in the late 1980s. Lori Riverstone-Newell, The Rise of State Preemption Laws in

Response to Local Policy Innovation, 47 PUBLIUS: J. OF FEDERALISM 403, 405 (2017). See

also, Luke Fowler & Stephanie Witt, State Preemption of Local Authority: Explaining

Patterns of State Adoption of Preemption Measures, 47 PUBLIUS: J. OF FEDERALISM 540


legislation did not specifically mention soda taxes directly, referring to

bans on taxes of food in general, but such broad legislation has the

effect of prohibiting future soda taxes. As a result, in 2017, legislatures

(2019) (”our findings indicate that preemption is better explained by political factors than

institutional features, which would suggest that recent preemption activity is likely a result

of increasing political competition and/or partisan polarization.” at 553; and “the rise in state

preemption in recent years appears to be connected to increased political competition more

so than allocating policy responsibilities in such a way that it produces the best public

services” at 554, https://doi.org/10.1093/publius/pjz011; David A. Dana and Janice Nadler,

Soda Taxes as a Legal and Social Movement, 13 NW J. L. SOC. POL’Y 84, 94-100 (2018).

According to the National Council of State Legislators, six states considered state

preemption laws on local bathroom ordinance, with only North Carolina implementing it.

http://www.ncsl.org/research/education/-bathroom-bill-legislative-tracking635951130.aspx.

In another food example, Ohio passed a law written by the lobbyists for the Ohio Restaurant

Association that barred localities from making health decisions as to restaurant food,

specifically trans-fat; a trial court found the law unconstitutional. Stephanie Strom, Judge

Rules Restaurant Law Stifles Ohio Cities, N.Y. TIMES, June 13, 2012, at B4; Joe Palazzol,

Judge Gets Behind Cleveland’s Trans-Fat Ban, WALL ST. J., June 13, 2012,

http://blogs.wsj.com/law/2012/06/13/judge-gets-behind-clevelands-trans-fat-ban/ (“two

months after Cleveland passed its law, the Ohio Senate amended the state budget to prohibit

municipalities from regulating the ingredients eateries use to prepare food — a victory for

the Ohio Restaurant Association, which lobbied for the measure.”); City of Cleveland vs.

State of Ohio, 989 N.E.2d 1072 (Ct. App. 2013) (“We also have concerns regarding the

process behind how the amendments were passed. In response to the city of Cleveland's

trans-fats Ordinance, the Ohio Restaurant Association ("ORA") sent an email to the Ohio

Department of Agriculture with an attached legislative proposal. The email stated that the

Ordinance was "exactly what we want to preempt with the attached amendment." The email

also stated that the amendment was "a high priority for Wendy's, McDonalds and YUM!."

At 1087. “According to the email, a senator had already been given a copy of ORA's

proposed legislation and would offer it in the Senate Finance Committee. Thus, the

amendments were drafted on behalf of a special interest group with the specific purpose of

snuffing out the Ordinance. … The facts giving rise to the birth of the amendments, coupled

with the lack of a nexus between the amendments and the appropriations bill, create a strong

suggestion that the provisions were combined for tactical reasons. The amendments in this

case present us with a classic instance of impermissible logrolling. [citation omitted] We

find that the amendments do not constitute a general law and violate the single-subject rule.”

At 1085-1086).


in Michigan, Arizona, and California enacted state laws that prohibit

local governments from implementing taxes on foods for a set number

of years.123 Michigan and Arizona were not considering any active

soda tax bans when their legislatures passed the bans. The California

law is most striking, considering Berkeley was the first city to pass a

soda tax, the number of cities in the state that already have soda taxes

in place, and the fact that additional California cities were actively

pursuing such taxes. The existing California soda tax laws are not

impacted by the 2018 ban on food taxes. The beverage industry fought

hard for such bans, arguing that decreased consumption would cost

jobs and food taxes disproportionately affect low-income consumers.

William Dermody, Vice President of Policy for the ABA, stated, “Our

aim is to help working families by preventing unfair increases to their

grocery bills….At the same time, we’re working with the public health

community and government officials to help … reduce sugar

consumption in ways that don’t cost jobs or hurt the small businesses

that are so important to local communities.”124 In 2017, Coke spent

more than $6 million on lobbying efforts in general, according to

OpenSecrets.org; the ABA spent $1,280,000.125

123 Jacobs, When Yes Really Means No to a Tax on Sugary Drinks, supra note 102, at B4;

Wan, Watson, Arthur, supra note 1. 124 Jacobs, When Yes Really Means No to a Tax on Sugary Drinks, supra note 102; Caitlin

Dewey, California, Home of the First Soda Tax, Agrees to Ban Them, WASH. POST, June 30,

2018, https://www.washingtonpost.com/news/wonk/wp/2018/06/30/california-home-of-the-

first-soda-tax-agrees-to-ban-them/?noredirect=on&utm_term=.f49a0e18273d. 125 The Center for Responsive Politics, 2017 Lobbying Coca-Cola Co.,



In 2018, both Oregon and Washington had similar bans on

future food taxes on the ballot in the Fall elections. Oregon’s ballot

initiative did not pass, but Washington’s did, making it the fourth state

that now prohibits future food taxes. The new initiatives did not impact

Seattle’s soda taxes already in place. Many voters in Oregon and

Washington were unaware that the ABA, Coke and Pepsi largely

financed the ballot initiatives, including together spending $25 million

in commercials alone.126 While some criticize these new laws as a

restriction on democracy and the independence of local government,

proponents of such bans, including spokesmen for the ABA and the

Washington Teamsters Union, cite the fact that most consumers don’t

want taxes on food items, including soda, and that the taxes are

regressive because they “take money out of the pockets of folks least

able to afford them.”127 Coke and other beverage companies fund most

of the ballot initiatives against soda taxes128 and will continue to seek

to preempt cities from imposing soda taxes by lobbying for new state

laws that prohibit local imposition of such taxes.129 In 2018, in

addition to funds spent on advertising, Coke spent $6,770,000 in


https://www.opensecrets.org/lobby/clientsum.php?id=D000000491&year=2017. 126 Jacobs, When Yes Really Means No to a Tax on Sugary Drinks, supra note 102; Rachel

Arthur, Elaine Watson, et al, Sugar Taxes: The Global Picture, FOOD NAVIGATOR, Dec. 14,

2018, https://www.foodnavigator-latam.com/Article/2018/12/14/Sugar-taxes-the-global-

picture. 127 Jacobs, When Yes Really Means No to a Tax on Sugary Drinks, supra note 102, at B4. 128 Andrew Jacobs, Where ‘Yes! to Affordable Groceries’ Really Means No to a Soda Tax,

N.Y. TIMES, Nov. 2, 2018, https://www.nytimes.com/2018/11/02/health/grocery-taxes-

oregon-washington-soda-tax.html. 129 Anahad O’Connor & Margot Sanger-Katz, California, of All Places, Has Banned Soda

Taxes, How a New Industry Strategy Is Succeeding, N.Y. TIMES, June 27, 2018,

https://www.nytimes.com/2018/06/27/upshot/california-banning-soda-taxes-a-new-industry-

strategy-is-stunning-some-lawmakers.html.


lobbying efforts and the ABA spent $1,360,000.130

Legislative efforts to enact state-wide soda taxes continue in

Connecticut, California and Massachusetts, as the ABA continues to

fight them.131 In 2019, the Governor of Connecticut is proposing a 1.5

cents per ounce tax on sugary drinks such as soda, sports drinks,

energy drinks, canned or bottled tea and coffee, but not diet sodas.132

In 2019, a California legislator again proposed a statewide soda tax,

only to shelve the initiative until 2020 because of lack of support.

Legislators in Massachusetts have introduced bills to tax sugary drinks

as well.133

130 The Center for Responsive Politics, 2018 Lobbying Coca-Cola Co.,



https://www.opensecrets.org/lobby/clientsum.php?id=D000000491&year=2018. 131 Christopher Keating, A Soda Tax Could Raise $163M a Year for Connecticut. Opponents

Say it Would be an Unfair Burden on Businesses and Families, HARTFORD COURANT, Apr.

16, 2019, https://www.courant.com/politics/hc-pol-clb-soda-tax-details-20190416-

qgtphdglx5h6jegfbwa2e4rnpm-story.html. Associated Press, California Proposal to Tax

Soda Pushed to Next Year, L.A. TIMES, Apr. 23, 2019, https://www.latimes.com/politics/la-

pol-ca-soda-tax-20190423-story.html; Katie Lannan, Legislators Eye Soda Tax,

METROWEST DAILY NEWS, Mar. 28, 2019,

https://www.metrowestdailynews.com/news/20190328/legislators-eye-soda-tax. 132 Keating, supra note 131. Estimates are the tax will raise $163 million by its second year.

The ABA is supporting a coalition called “Keep CT Affordable” to oppose the tax, arguing

the move will hurt small businesses such as gas stations and corner stores and force them to

cut jobs. The coalition claims a 12-pack of soda will rise in price from $5.69 to $7.85 if the

tax is implemented. Id. 133 Associated Press, California Proposal to Tax Soda Pushed to Next Year, supra note 131;

Lannan, supra note 131. The proposed tax would be tiered, with beverages with 7.5 grams


The American Academy of Pediatrics and the American Heart

Association in March 2019 issued policy recommendations

encouraging legislators to pass new laws to tax soft drinks, impose

warning labels and restrict advertising, in an effort to keep younger

people from consuming too many of the beverages. The two leading

medical groups referred to such drinks as “a grave health threat to

children and adolescents,” with one doctor stating “I’ve seen 2-year-

olds with fatty liver disease and teenagers with Type-2

diabetes…These are diseases we used to see in their grandparents.”134

The ABA continues to argue that sugary drinks are being unfairly

blamed at a time when the industry is working to create heathier

products with less calories.

B. SODA TAX INITIATIVES OUTSIDE THE UNITED STATES

AND COKE’S RESPONSES

The drive to tax sugary drinks is worldwide. For example,

France implemented a flat-rate tax of 7.53 euro per hectoliter on all

sugar-sweetened in 2012, and banned restaurants from offering free

refills of sugary sodas and drinks in 2017. In 2014, obese adults made

up 15.3% of the French population, compared to the European average

of 15.9% and the then-U.S.-average of 36.5%.135 In 2018, France

modified its soda tax to introduce a tiered system, with a 20 euro per

of sugar or less per 12 fluid ounces being untaxed, those with 30 grams of sugar or more per

12 fluid ounces being taxed at 2 cents per ounce, and those falling in between being taxed at

1 cent per ounce. Id. 134 Andrew Jacobs, Two Top Medical Groups Call for Soda Taxes and Advertising Curbs on

Sugary Drinks, supra note 47. 135 Kimiko de Freytas-Tamura, New Law in France Bans Free Soda Refills, N.Y. TIMES, Jan.

28, 2017, at A7.


hectoliter tax if the product contains more than 11 grams of added

sugar per 100ml. Coke has not reformulated its products in France, but

has reduced bottle sizes and increased prices in response.136

In 2013, Mexico passed a soda tax, a significant development

because Mexico’s obesity rate is the second-highest in the developed

world, just behind the United States.137 At that time, Mexico was the

largest consumer of Coke products in the world, with the average adult

drinking 728 servings during the year.138 The tax was applied to the

bottlers and distributors, so it would be reflected in the price tag on the

bottle itself, not added at the cash register. The result was a one peso

increase for each liter, or about a 10% price increase.139 The soda

industry fought hard against the tax here too, including publishing ads

claiming 3.5 million people would lose jobs as a result of the tax and

ads attacking the link between soda consumption and obesity. Coke

itself, through its Mexican branch, spent $131,000 installing special

drinking fountains that purify tap water in forty-two Mexican schools,

promising to spend approximately $2 million more to install such

fountains in another seven hundred schools. Critics complain that was

merely for brand publicity, since all the water fountains were clearly

136 Arthur, et al., supra note 126. 137 In Mexico, A Soda Tax Success Story, BLOOMBERG BUSINESSWEEK, Jan. 18, 2016,

http://www.pressreader.com/australia/bloomberg-businessweek-

asia/20160118/281715498614593. 138 Special Report on Obesity, The Big Picture, THE ECONOMIST, Dec. 15, 2012, at 3-4. 139 Sanger-Katz, Yes, Soda Taxes Do Seem to Discourage Soda Drinking, supra note 84.


marked with the Coca-Cola logo.140 However, such lobbying and

advertisement campaigns failed to defeat Mexico’s law. By December

2014, research shows a 12% drop in soda sales in Mexico, and a 17%

drop among lowest-income consumers. As with all of the studies of the

impact of soda taxes on demand, any correlation between the soda tax

and a decrease in rates of obesity and diabetes will take years to

determine definitively; however, soda tax advocates hail Mexico’s tax

as a success.141

In 2014, Chile imposed one of the highest soda taxes in the

world, at 18% on beverages with high sugar content. The food laws

also require companies to remove cartoon characters from cereal boxes

that contain sugar, ban the sale of junk foods like ice cream and

chocolate in the schools, and prevent these items from being

advertised on various media sites that target children between the

hours of 6 a.m. and 10 p.m. Food companies must place a warning

label on products high in sugar, salt and saturated fat, even on foods

often labeled as “healthy,” such as cereal bars, yogurt and juice boxes.

In Chile, 75% of adults and 50% of six-year-olds are overweight or

obese; the medical costs of obesity in 2016 were over $800 million. By

2017, over 20% of the food products sold in Chile were reconfigured

to comply with the new law and avoid the black warning label.142 In

2018, Chile reported a 22% decrease in sales of sugary soft drinks.143

In October 2016, the World Health Organization stated that

140 NESTLE, supra note 7, at 374. 141 Sanger-Katz, Yes, Soda Taxes Do Seem to Discourage Soda Drinking, supra note 84. 142 Andrew Jacobs, In Sweeping War on Obesity, Chile Slays Tony the Tiger, N.Y. TIMES, Feb.

7, 2018, https://www.nytimes.com/2018/02/07/health/obesity-chile-sugar-regulations.html. 143 Arthur, et al., supra note 126.


countries should impose soda taxes on sugary drinks like sodas, energy

drinks and iced teas, to reduce consumption and fight obesity.144 Taxes

have been implemented in over 30 countries, including France, India,

Saudi Arabia, South Africa, Thailand, Great Britain, Ireland, Canada,

Hungary, the United Arab Emirates, and Israel.145 The United

Kingdom and Ireland both imposed new taxes in 2018. The U.K. Soft

Drink Industry Levy imposes a tax of 18 pence per liter for beverages

with 5 grams of sugar per 100ml or more and 24 pence if the sugar

content is 8 grams or more. The soda tax raised $197 million in its first

seven months. The Irish Sugar Sweetened Drinks tax is similar to the

U.K. tax and was expected to raise $45 million in its first year.146 On

the other hand, Colombia rejected a soda tax in 2016.147

As soda consumption continues to fall, obesity is leveling

off.148 From Mexico to Ireland, from Philadelphia to Seattle, soda

taxes have led to measurable declines in consumption. A 10% tax on

average produces a 7% drop in consumption, according to recent

144 Sabrina Tavernise, W.H.O. Recommends Taxing Sugary Drinks, N.Y. TIMES INTERN’L, Oct.

12, 2016, at A11. 145 Jacobs, Philadelphia’s Primary Will Decide Future of Soda Tax, Though It’s Not on Ballot,

supra note 94; Jacobs, After Drug Wars, a Dangerous Battle Over Soda, supra note 63 at

A1, A8; Sanger-Katz, Pointing to Cash, Not Health, to Make a Soda Tax Palatable, supra

note 85 at A3; Wan, Watson, Arthur, supra note 1; Olga Khazan, What the World Can

Learn from Denmark’s Failed Fat Tax, WASH. POST, Nov. 11, 2012,

http://www.washingtonpost.com/blogs/worldviews/wp/2012/11/11/what-the-world-can-

learn-from-denmarks-failed-fat-tax/; Arthur, et al., supra note 126. 146 Arthur, et al., supra note 126. 147 Id. 148 NESTLE, supra note 7, at 385.


research.149 The decrease is not evenly distributed among the

population; however, as soda consumption rates remain high in lower-

income communities.150 Additional studies show consumers will shop

for soda in other cities outside the jurisdiction, obviating the health

benefit of the tax.151

Coke acknowledges the risk of soda taxes to its business.

Coke’s Annual Report to Shareholders on Form 10-K, Coke states:

In addition, in the past, the U.S. Congress considered imposing a

federal excise tax on beverages sweetened with sugar, HFCS or

other nutritive sweeteners and may consider similar proposals in

the future. As federal, state and local governments in the United

States and throughout the world experience significant budget

deficits, some lawmakers have singled out beverages among a

plethora of revenue-raising items and have imposed or increased,

or proposed to impose or increase, sales or similar taxes on

beverages, particularly sugar-sweetened beverages. Increases in or

the imposition of new indirect taxes on our business operations or

products would increase the cost of products or, to the extent

levied directly on consumers, make our products less affordable,

which may negatively impact our net operating revenues and

profitability.152

With such a major risk to its profits, Coke and the beverage

industry will continue to challenge soda tax and similar regulatory

initiatives in the United States and abroad. Susan Neely, President of

149 Jacobs, Two Top Medical Groups Call for Soda Taxes and Advertising Curbs on Sugary

Drinks, supra note 47. 150 Id. 151 Black, supra note 52, at 283. 152 2018 Form 10-K, supra note 10, at 14.


the ABA stated at an industry conference in 2013 that the industry will

continue to fight soft-drink taxes: “We will continue to challenge,

wherever there is an onerous tax or onerous regulation in the public

domain, and we will be there and we will fight it.”153

C. FUNDING RESEARCH TO OPPOSE LEGISLATIVE

INITIATIVES

Lobbying, legislative initiatives and litigation are ways to

address unfavorable changes to laws and regulations, a necessity

because a firm must operate within the legal constraints of that country

(or multiple countries in the case of multinational companies). As

discussed above, Coke and the soft drink industry followed standard

lobbying practice, strategy and tactics in opposing the soda tax

proposals through legal and legislative means.

Another tactic is to fund research that can be used in support of

the lobbying efforts,154 mostly to have citable research to refute the

153 Alan Rappeport, Coke: Out for the Calorie Count, FIN. TIMES, Jan. 25, 2013,

http://www.ft.com/cms/s/0/cbd21108-66c1-11e2-a83f-00144feab49a.html. 154 Eric Lipton et al., Top Scholars or Lobbyists? Often It’s Both, N.Y. TIMES, Aug. 9, 2016, at

A1; Eric Lipton & Brooke Williams, Scholarship or Business? Think Tanks Blur the Line,

N.Y. TIMES, Aug. 8, 2016 at A1; KAY LEHMAN SCHOLZMAN & JOHN T. TIERNEY,

ORGANIZED INTERESTS AND AMERICAN DEMOCRACY 362-364 (1986); DRUTMAN, supra note

70, at 35-40 (“Corporations … are investing considerable sums in suturing the ‘intellectual

environment,’ overloading minds of policymakers and their staff so that when the time

comes to make a decision, certain arguments and frames will come to mind quicker than

others, an certain ideas and solutions will have been pre-legitimated by a wide range of

trusted experts …[¶] Detailed policy analysis and thought leadership costs money – and


evidence that ascertained the injurious health effects in the first place.

Soda companies often sponsor research efforts related to obesity, type

2 diabetes and other health issues in order to have influence over

recommendations and guidelines. Such research results also can be

used in support of lobbying efforts to oppose the initiatives to tax

soda.155 Such strategies are common place in industry. “[E]xperts –

especially think tanks – are a frequent presence alongside interest

groups and lobbyists in the political process.”156 The New York Times

reported:

An examination of 75 think tanks found an array of

researchers who had simultaneously worked as registered

lobbyists, members of corporate boards or outside consultants in

litigation and regulatory disputes, with only intermittent disclosure

of their dual roles.

With their expertise and authority, think tank scholars

offer themselves as independent arbiters, playing a vital role in

Washington’s political economy. Their imprimatur helps shape

corporations are willing to pay for it.”). ANDREW RICH, THINK TANKS, PUBLIC POLICY, AND

THE POLITICS OF EXPERTISE 103 (2004): “… think tanks, as policy experts, to be quite

politically engaged in policy making; the results suggest the possibilities for think tanks to

affect, if not determine, the dimensions and extent of their political engagement.” Also,

“Once an issue is under deliberation and headed toward policy enactment, from the point

when policy makers are collectively involved until final decisions are imminent, elected

officials are positioning themselves on issues, and expertise becomes valuable as

ammunition in policy battles and as support for policy makers’ already-developed views.”

Id. at 108. 155 For a more exhaustive list of Coke’s other initiatives to influence research and public

awareness, see NESTLE, supra note 7, at 133-328. 156 RICH, supra note 154, at 209. “Experts are political actors, and think tanks are among the

most active and efficient expert political institutions. Think tanks have certain advantages

for making their work influential, advantages that enhance the political role of experts.” Id.

at 210.


government decisions that can be lucrative to corporations.

But the examination identified dozens of examples of

scholars conducting research at think tanks while corporations

were paying them to help shape government policy….

Largely free from disclosure requirements, the

researchers’ work is often woven into elaborate corporate lobbying

campaigns.157

In this instance, Coke donates money to fund research. For

example, Coke has sponsored or donated money to numerous

organizations, including the Juvenile Diabetes Research Foundation,

the American Academy of Pediatrics, the American Diabetes

Association, and the International Union of Nutritional Sciences.

Coke gave over $1.75 million to the Foundation for the National

Institutes of Health during the period from 2010 to 2014.158

The Coke-funded research tends to minimize the impact of

sugar consumption on obesity rates. As a result, the connection

between Coke and the research institution is often controversial and

results in negative media attention. From 2010-2012, when both

157 Lipton, et al., supra note 154. In the battle for net neutrality that was then an issue before

the Federal Communications Commission, the industry provided a dozen studies that had

been funded by the telecommunications industry, according to The Times. Id. Likewise,

“FedEx teamed up with the Atlantic Council — a think tank that focuses on international

relations, with annual revenue that has surged to $21 million from $2 million in the last

decade — to build support for a free-trade agreement the company hoped would increase

business. Lipton and Williams, supra note 154. 158 NESTLE, supra note 7, at 258. See also, Black, supra note 52, at 166-167, for further

examples of Coke’s contributions to foundations during this time period.


obesity and diabetes rates were increasing, Coke donated over $1.4

million to the CDC Foundation. Some of the CDC projects designated

to receive the funds promoted exercise as the solution to obesity and

minimized the impact of sugar consumption. Then, in 2013, Coke

funded $1 million, almost 100% of the $1.2 million budget, of the state

of Georgia’s “Power Up for 30” program to promote 30 minutes of

additional exercise per day for children. After the connection became

public and subject to negative media attention, the CDC cut ties with

Coke in 2013, concluding there was a misalignment of mission

between the CDC and Coke.159

In November 2015, journalists reported that Coke had funded

research to downplay the effects of Coke products on obesity rates.

Coke established a non-profit organization, Global Energy Balance

Network, whose members were university scientists who again

encouraged consumers to focus on exercise more so than calories and

sugar consumption. Coke spent $1.5 million to support the group,

including $1 million to the University of Colorado medical school.

After the news story broke, Coke’s chief science and health officer,

Rhona Applebaum, resigned and the University of Colorado returned

the donation.160 In December 2015, Coke shut down the Global Energy

Balance Network due to pressure from public health authorities who

objected to the group’s stated mission of playing down the correlation

between soft drinks and obesity. Several groups that had been

accepting funding, including the American Academy of Pediatrics and

159 Sheila Kaplan, Chief of C.D.C. Saw Coca-Cola as Fitness Ally, N.Y. TIMES, July 23, 2017,

at A1, A21. 160Anahad O’Connor, Coke’s Chief Scientist, Who Orchestrated Obesity Research, Is Leaving,

N.Y. TIMES, Nov. 24, 2015, https://well.blogs.nytimes.com/2015/11/24/cokes-chief-

scientist-who-orchestrated-obesity-research-is-leaving/.


the Academy of Nutrition and Dietetics, also severed their

relationships with the organization and Coke.161

In 2016 The Annals of Internal Medicine published a review

attacking global advice to consume less sugar, arguing the scientific

evidence for such advice is weak. Critics immediately complained that

the review was biased because it was paid for by the International Life

Sciences Institute. Based in Washington, D.C., this group is funded by

large food and chemical companies, including Coke and Tate & Lyle,

one of the world’s largest suppliers of high-fructose corn syrup. Critics

argue this is clearly ‘an attempt by the industry to undermine sugar

guidelines from the World Health Organization and other health

groups that urge children and adults to consume fewer products with

added sugar, such as soft drinks….”162

Also in 2016, an article in the American Journal of

Preventative Medicine showed that Coke and PepsiCo donated

millions to health organization at the same time they were spending

millions to defeat legislation that would limit soda consumption. For

example, the nonprofit Save the Children supported soda taxes until

2010 when it accepted a $5 million grant from Pepsi and was seeking a

161 Anahad O’Connor, Research Group Financed by Coca-Cola Says It Will Disband, N.Y.

TIMES, Dec. 1, 2015, https://well.blogs.nytimes.com/2015/12/01/research-group-funded-by-

coca-cola-to-disband/. For a more detailed discussion of Coke’s relationship with Global

Energy Balance Network, see Black, supra note 52, at 167. 162 Anahad O’Connor, Study Tied to Food Industry Tries to Discredit Sugar Guidelines, N.Y.

TIMES, Dec. 20, 2016, at B1, B5.


grant from Coke. The Academy of Nutrition and Dietetics, which did

not support New York’s 2012 attempt to ban extra-large sodas, also

accepted $525,000 in donations from Coke that same year. The

American Diabetes Association, the American Heart Association, and

the National Institutes of Health have all received donations from

Coke in recent years, ranging from $140,000 to nearly $2 million. At

the same time, from 2011 to 2015, Coke spent over $6 million a year

on average lobbying against federal, state and local laws that would

limit soda consumption.163 In general, Coke’s practice of funding

research has resulted in doubts whether the recipient groups are really

advancing unbiased medical research or are overly influenced by

Coke’s direction and financial support. Nevertheless, Coke continues

utilizing this tactic, and there are many examples of Coke’s funding of

research and organizations, often resulting in unfavorable publicity

when disclosed.164 Other tactics used by Coke, the ABA, and the soft

drink industry in general, comprise the usual lobbying methods of

contacts with legislators, legislative staff, hiring consultants, testifying

at hearings including regulatory hearings, filing comments with

regulators on proposed regulations, and engaging in public education

and public relations campaigns.165

163 Anahad O’Connor, Soda Giants Back, Then Lobby Against, Public Health, N.Y. TIMES,

Oct. 11, 2016, at B2. 164 For example, see Anahad O’Connor, Coca-Cola Funds Scientists Who Shift Blame for

Obesity Away from Bad Diets, N.Y. TIMES Aug. 9 2015,

https://well.blogs.nytimes.com/2015/08/09/coca-cola-funds-scientists-who-shift-blame-for-

obesity-away-from-bad-diets/?auth=login-email; Anahad O’Connor, Coke Discloses

Millions in Grants for Health Research and Community Programs, N.Y. TIMES, Sept. 22,

2015, https://well.blogs.nytimes.com/2015/09/22/coke-discloses-millions-in-grants-for-

health-research-and-community-programs/. 165 BAUMGARTNER, supra note 120, at 151-152 (describing lobbying generally).


Internal e-mails leaked from Coca-Cola reveal a “coordinated

war” against soda taxes and show the company, and the ABA and

other beverage companies, continue to resist soda taxes by funding

grass-roots organizations to counter negative messaging, funding

“research to give a hue of legitimacy to their anti-tax claims, pursuing

social media influencers, lobbying at every level of government and

targeting key journalists for persuasion.”166 Coke and the beverage

industry have actively and aggressively engaged in the tactics of

lobbying, advertising and marketing, and litigation to counter soda

taxes in the United States and around the world.

V. GOVERNMENT RATIONALE FOR USING SODA TAXES

TO ADDRESS CONSUMPTION AND RELATED OBESITY

The use of taxes to encourage or discourage consumption

choices is long-standing. Sin taxes have been used to discourage

consumption of alcohol and tobacco and other items.167 Pollutant taxes

(including cap-and-trade versions) seek to discourage toxic emissions.

Employer-provided wellness programs and pre-tax deductions for

fitness activities and exercise equipment seek to encourage personal

166 Lappe, supra note 2. 167 Rachell Holmes Perkins, Salience and Sin: Designing Taxes in the New Sin Era, 2014

B.Y.U. L. REV. 143, 149-159 (2014); Franklin Liu, Sin Taxes: Have Governments Gone Too

Far in Their Efforts to Monetize Morality?, 59 B.C. L. REV. 763, 767-768 (2018) (noting

that the excise tax in 1791 on whiskey and other alcoholic spirits was one of the first sin

taxes intended to generate revenue and “warn the public about the negative effects

associated with consuming alcohol”).


health.168

Soda taxes, and the New York City portion restriction attempt,

do not restrict a person’s consumption of sugary sodas, unlike some

laws that do ban particular ingredients.169 Similarly, taxes on alcohol

and tobacco do not restrict a person’s consumption of those items. The

taxes instead seek to discourage some level of consumption because

the higher price – raised by taxes – should make the product relatively

less attractive compared to other things the consumer might spend his

or her money on.170 Why should government care about this behavior

and take action to discourage it?

One axis of concern is individual welfare, which has the

tension of, on one end, paternalism, and the other end, the right of self-

determination. Paternalism involves “making someone do something

168 Efrat, supra note 59, at 257-258. Liu, supra note 167, at 771 (“the main justifications

advanced in support of sin taxes include their ability to raise revenue, advance private health

outcomes by discouraging individual consumption of sinful goods and services, and promote

public health by compensating society for the costs of sinful consumption”). 169 E.g., trans fats in restaurants, which started with New York City, N. Y. City Health Code

§81.08. This reduced the serum levels of trans fatty acids in people by up to 62%, with a

resulting 23% decline in coronary risk. Melecia Wright, et al., Impact of a Municipal Policy

Restricting Trans Fatty Acid Use in New York City Restaurants on Serum Trans Fatty Acid

Levels in Adults, 109 AM. J. OF PUB. HEALTH 634, 635 (2019). The U.S. Food and Drug

Administration banned trans fats in 2015 (effective 2018), https://www.fda.gov/food/food-

additives-petitions/final-determination-regarding-partially-hydrogenated-oils-removing-

trans-fat. 170 Jonathan Cummings, Obesity and Unhealth Consumption: The Public-Policy Case for

Placing a Federal Sin Tax on Sugary Beverages, 34 SEATTLE U. L. REV. 273, 293-294

(2010): “Rather than banning a product or activity outright, sin-tax policies merely provide

economic and health-related incentives not to consume an unhealthy product; the final

choice whether to consume or not still remains unabridged. Sin taxes do not impede the

autonomous functioning of adults, but instead help coax and cajole those autonomous adults

into healthier decision making.”


she does not want to do, or keeping her from doing something she does

want to do, in order to increase her welfare”171 Paternalism “prevents

harm to self, not harm to others. Actions that improve someone's

welfare, without interfering with her liberty or autonomy, are also not

paternalism ….”172 At the other end is the utilitarian side, that

governmental efforts to promote individual welfare are unlikely to

succeed, and anyway individuals have and ought to have the autonomy

and self-determination to make decisions,173 even to make bad

decisions, especially when those decisions may reflect values, in this

case whether health is more valued than pleasure.174 The argument

here is that the decision to drink soda should be an “area of individual

self-determination where the government should have not part.” 175

The welfare/paternalistic response, however, is that “mindless eating”

is addictive or similarly defective behavior that:

… is not an exercise of autonomy and does not necessarily reflect

171 Anne Barnhill, Choice, Respect and Value: The Ethics of Healthy Eating Policy, 5 WAKE

FOREST J.L. & POL’Y 1, 9-10 (2015). 172 Id. at 10. Hard paternalism prevents someone from engaging in voluntary and informed

action; soft paternalism prevents someone from engaging in involuntary and uninformed

action. Id. at 18. 173 Id. at 10-11. Also see, Brian Galle, The Problem of Intra-Personal Cost, 18 YALE J.

HEALTH POL’Y, L. & ETHICS 1, 19 (2018). 174 Barnhill, supra note 171 at 11. Although sometimes the value may be engaging in desired

social activities with others even if it means eating bad food. Galle, supra note 173, at 28-

29. There is a separate and deep economics literature of studies on identifying consumer

preferences, particularly over time periods, that is beyond the scope of this paper. 175 Andrew J. Haile, Sin Taxes: When the State Becomes the Sinner, 82 TEMP. L. REV. 1041,

1053 (2009).


individuals' informed choices, preferences, goals, or values, [ and]

policies preventing people from engaging in mindless eating do not

violate individual autonomy, do not impose values upon people,

and are likely to increase individual welfare because they will

reduce the incidence of rationally defective behavior and make

people healthier.176

Because foods high in sugar, fat and salt stimulate the reward

system of the brain to engage in certain behaviors, even if the person

does not really want it, and because environmental cues encourage

certain eating behaviors (thus large portions encourage more

consumption),177 the paternalistic response is that individuals are not

acting of their own volition. These various triggers cause

systematically irrational behaviors,178 which is a problem for

libertarian and economic theories that rely on the assumption of

rational actors.179 Thus, soft paternalism says, ‘You can buy two 16-oz

bottles or glasses of soda, if you want that, but a default to a 32-ounce

serving size displaces deliberative choice.’”180 As Anne Barhnhill and

176 Barnhill, supra note 171, at 12-13. 177 Id. at 13-14. See also, Galle, supra note 173, at 20: “By observing individual behavior over

time, we can see whether people regret some of their own decisions, or take steps

(commitments) to prevent themselves from making bad choices. In this way, we can still

rely on revealed preferences. The concept of an ‘internality’ does not necessarily privilege

long-run over short-run preferences; we can treat them equally by simply adding them up, in

effect balancing the revealed value of long-term preferences, such as regret and

commitment, against the revealed value of momentary, System preferences. But since long-

run preferences last much longer, they often will greatly outweigh those that last only

fleetingly.” 178 Id. at 15-16. Galle, supra note 173, at 29-32, which provides an excellent compilation of

economic reasons why interventions for internalities are useful. The effects of poverty on

decision-making is a topic beyond the scope of this article. 179 Cummings, supra note 170, at 282-283. 180 See generally, Barnhill, supra note 171, at 19-20.


others point out, perhaps the paternalism involved here is not

protecting the individual consumer against him- or herself but from the

manipulations by industry:

According to this line of thought, the food environment that

encourages unhealthy eating was created largely as a result of

intentional action by industry. Industry formulates unhealthy food

products to be in some sense irresistible, intentionally misleads

consumers about the nutritional value of foods, and engages in

aggressive marketing that establishes unhealthy food as desirable

and socially normative. If unhealthy eating is not conceptualized

primarily as individuals harming themselves, but as industry

intentionally harming consumers, then policies preventing

unhealthy eating are in fact efforts to protect consumers from harm

at the hands of others – not efforts to protect consumers from

themselves. In this way of framing the issues, even those who

think that government has no business in paternalistically

protecting us from ourselves, and think that the coercive power of

government should only be used to protect us from each other,

might still support policies limiting food options.181

181 Id. at 24-25. See also, Pierre Chandon, How Package Design and Packaged-Based

Marketing Claims Lead to Overeating, 35 APPLIED ECON. PERSP. & POL'Y 7, 11-12 (2013),

noting that “Health halos driven by branding, marketing, health or nutrition claims do not

simply change expectations but can act as a placebo and change post-intake evaluations and

consumption….” and “Health halos influence the volume of food consumption and can lead

to overeating, defined here as people eating more without being aware of it….” and “larger

sizes are typically more profitable for food marketers, and they benefit from a higher

perceived economic and environmental value – a win-win in all aspects aside from

convenience and consumption control….” Also “…larger serving sizes significantly

increase consumption,” at 14; See also Katherine Pratt, A Constructive Critique of Public

Health Arguments for Anti-obesity Soda Taxes and Food Taxes, 87 TUL. L. REV. 73, 105


This argument leads to the second axis of concern, social

welfare and public good, particularly where the costs of health care

for the obese are borne by other people through medical insurance or

through publicly-provided medical benefits.182 Medicare and

Medicaid pay for half the obesity-caused health expenses in the United

States.183 These costs are economic externalities of the individual

choices that others bear, for which taxes on those who cause such

externalities are a way to recoup those costs, in what are called “Pigou

taxes” after economist Arthur Cecil Pigou.184 A Pigovian tax is

“designed to help individuals account for, or internalize, the negative

side effects their personal consumption habits impose upon other

members of society. … the consumer is forced to internalize that

additional social cost when making their purchase decision, as the

price now reflects the sum of both the private and social cost of their

behavior.”185 Proponents of sin taxes note that such taxes better

allocate the costs from use of the harmful product because the cost is

borne by the individual using the product rather than by the general

population.186 If the harm is borne by the sick, obese people

(2012): “In the context of fast-food restaurant meals, critical realists argue that manufactured

situational pressures (for example, larger portions) cause restaurant patrons to consume

more, without consumers even being aware of the manipulation.” 182 Chandon, supra note 181, at 25-26. 183 Cummings, supra note 170, at 287-289. 184 Cummings, supra note 170, at 286-287. See generally, Erin Adele Scharff, Green Fees:

The Challenge of Pricing Externalities under State Law, 97 NEB. L. REV. 168 (2018). Other

externalities include extra greenhouse gas emissions from generating the extra food eaten,

resulting nitrogen-based fertilizer run-off into waterways, land degradation from sugar beet

production, decreased worker productivity, and government crop subsidies for the crops that

comprise junk foods. Roberta F. Mann, Controlling the Environmental Costs of Obesity, 47

ENVTL. L. 69, 703-707 (2017). 185 Liu, supra note 167, at 772-772. 186 Haile, supra note 175, at 1047.


themselves, the problem is not an externality but an internality, for

which taxes may not be effective,187 and which shifts the question back

to the first axis of individual choices.188

A third axis of concern is justice, particularly tax justice.

Governments must raise revenues, and thus tax, and the decision of

what to tax “is inevitably a form of regulation,” writes Shoked:

Any tax determines which actors will contribute to the

government, how much, and when. That determination must affect

individual economic and social behavior. It renders some activities

more expensive, and thus diverts investments into other activities.

This is doubly true with respect to excise taxes. These are taxes

that single out specific goods or behaviors – and not other, similar

ones – for special treatment. Choosing to tax certain products but

not others – sweetened beverages but not unsweetened ones,

plastic bags but not reusable ones – by definition involves a

judgment call respecting products' relative worth and interferes

with relevant market actors' future behavior. This judgment call

and interference might well represent the original spur for the

enactment of a given excise tax, …

Especially when analyzing excise taxes, therefore, attempts to

categorically separate government's function as a collector of revenue

from its function as a regulator are – as far as sound economic thinking

goes – futile. The enacting local officials often do not even attempt to

187 Victor Fleischer, Curb Your Enthusiasm for Pigovian Taxes, 68 VAND. L. REV. 1673, 1704-

1708 (2015); Perkins, supra note 167, at 176-181. 188 Galle, supra note 173, at 11-14.


do so themselves.189

Whether particular taxes are fair is also debatable.190 A tax on

sugary beverages addresses the externalities of obesity-related

healthcare, and should “increases fairness by better allocating the

previously unaccounted costs of overconsumption.”191 Taxes that

have greater impact on lower-income people are considered regressive

(as Coke has argued).192 Soda taxes consume a more proportionate

share of a poor person’s income than a wealthier person’s.193 Yet every

income, sales, and consumption tax always affects the lowest income

people more. Further, if the poorest people are least able to evaluate

long-term health decisions, then arguably the need for public welfare

incentives is greater. Every tax credit and tax subsidy are also intended

to modify behavior, though such effectiveness is also questionable and

beyond the scope of this paper.194

189 Nadav Shoked, Cities Taxing New Sins: The Judicial Embrace of Local Excise Taxation,

79 Ohio St. L.J. 801, 830 (2018). But see, Haile, supra note 175, at 1053-1054, arguing that

states develop moral hazard and thus a conflict of interest by relying on sin taxes, to keep

such sales going to generate revenue, as exemplified in the master tobacco litigation

settlements. “Earmarking” or designating such revenues for the particular external cost to

be recouped should solve the problem. Haile, id. at 1064-1065. 190 For a good discussion along these lines, see generally Lindsay Wiley, Health Law as Social

Justice, 24 CORNELL J.L. & PUB. POL’Y 47 (2014); Tyler LeFevre, Justice in Taxation, 41

VT. L. REV. 763 (2017). 191 Cummings, supra note 170, at 293. 192 Galle, supra note 64, at 886-887; Liu, supra note 167, at 778-780. 193 Haile, supra note 175, at 1050. 194 Efrat, supra note 59, at 257 (discussing wellness programs); Fleischer, supra note 187, at

1709-1710.


VI. COKE ADAPTS ITS BUSINESS STRATEGY TO A

CHANGING REGULATORY AND LEGAL

ENVIRONMENT

The health and public policy rationales for sin taxes in general,

and soda taxes in particular, focus on reducing consumer demand for a

product. However, an additional rationale for such taxes may be the

impact on the supply side of the equation, in that such taxes may

promote changes by the manufacturer in the product deemed by

government to be harmful. During the same time frame that Coke and

the beverage industry have fought soda taxes and other legislative

initiatives through lobbying, litigation, marketing and advertising, and

research donations, Coke also has been changing its business

objectives to be an all-inclusive beverage company. In its 2018 Annual

Report on Form 10-K, Coke notes that customer preferences are

changing in regards to health and wellness, obesity, artificial

sweeteners, changing lifestyles and other factors.195

Coke’s Annual Report for 2018 notes that one of the five

strategic priorities for the company now is “accelerating growth of a

consumer-centric portfolio”196 In 2017, Coke’s new President and

CEO, James Quincey, introduced a new direction for the company

called “Beverages for Life.” According to Quincey, “we’re focusing

on people’s evolving tastes and preferences by giving them more of

195 2018 Form 10-K, supra note 10, at 10. 196 Id. at 31.


the drinks the want. That’s how we will become a larger part of the

eight beverages a day people drink.”197 Coke describes its new

business philosophy as: “We believe our success depends on our

ability to connect with consumers by providing them with a wide

variety of beverage choices to meet their desires, needs and lifestyle

choices.”198 Coke’s Annual Report on Form 10-K for 2018 notes that

consumer demographics are changing and consumer preferences are

evolving, and:

As a consequence of these changes, many consumers want more

choices, personalization, a focus on sustainability and recyclability,

and transparency related to our products and packaging. We are

committed to meeting their needs and to generating new growth

through our portfolio of more than 500 brands and more than 4,300

beverage products (including more than 1,400 low- and no-calorie

products), new product offerings, innovative and sustainable

packaging, and ingredient education efforts. We are also

committed to continuing to expand the variety of choices we

provide to consumers and to providing options that reflect

consumer concerns about impacts to our planet.199

Coke now sells low and no-sugar brands and is increasing the

197 The Coca-Cola Company, Q&A with Our President and Chief Executive Officer,

Beverages for Life, 2018 Proxy Statement, at 4. Quincey used himself as an example of the

“Beverages for Life” concept, stating, “I drink juice in the morning – Simply if I’m in the

U.S., innocent if I’m back in the UK, or Del Valle if I’m visiting Mexico. I drink

Smartwater throughout the day, and I have been drinking a Coke Zero Sugar daily for a long

time.” Id. at 5. 198 2018 Form 10-K, supra note 10, at 30. 199 Id. at 32-33.


use of alternate sweeteners.200 Coke has lowered the average number

of calories in its drink products by 9% since 2000.201 Coke reduced the

amount of sugar in more than 200 of its soft drinks sold globally in

2016 and reduced sugar in an additional 500 in 2017 and another 100

in 2018. Coke currently offers more than 1,100 reduced or no-sugar

drinks. In response to the recent initiatives in Chile, Coke created 32

new drinks to be sold in the country and 65% of Coke’s portfolio in

Chile is now low or no-sugar drinks.202

Also, Coke has experimented with other all-natural sweeteners,

such as stevia, to replace the more controversial aspartame in Diet

Coke. Coke notes in its annual Form 10-K filings that “Public debate

and concern about perceived negative health consequences of certain

ingredients in our beverage products, such as non-nutritive sweeteners

and biotechnology-derived substances…. may affect consumers’

preferences and cause them to shift away from some of our beverage

products.”203 Due to consumer concern about aspartame, Diet Coke

was losing sales at 7% a year, almost double the decline rate of U.S.

200 Jay Moye, Coke’s Strategic Evolution Supports World Health Organization’s Daily Added

Sugar Recommendations, May 16, 2017, https://www.coca-

colacompany.com/stories/coke_s-strategic-evolution-supports-world-health-organizations-d;

Jay Moye, Coke’s Way Forward: New Business Strategy to Focus on Choice, Convenience

and the Consumer, Feb. 23, 2017, https://www.coca-colacompany.com/stories/cokes-way-

forward-new-business-strategy-to-focus-on-choice-convenience-and-the-consumer. 201 Food for Thought, supra note 19, at 10. 202 Jacobs, In Sweeping War on Obesity, Chile Slays Tony the Tiger, supra note 142. 203 2018 Form 10-K, supra note 10, at 11.


cola sales in total.204 The new stevia-sweetened product, first launched

in 2013, is sold in green bottles under the brand name Coca-Cola

Life.205 It is sweetened with a blend of cane sugar and stevia leaf

extract and has 35% fewer calories and less sugar than regular Coca-

Cola.206

Coke is relaunching certain of its products to focus on non-

sugar alternatives. In 2017, Coke relaunched the Coke Zero product

and renamed it Coke Zero Sugar. 207 Coke changed the blend of natural

flavors in the Coke Zero Sugar product but continued to sweeten it

with aspartame and acesulfame K. Coke believes the name now more

clearly informs consumers that the drink has zero sugar because that

fact is included in the name itself.208 In 2017, Coke successfully

completed a global launch of Coke Zero Sugar in 20 markets.209 In

204 Ellis, supra note 13, at 27. 205 Suddath, supra note 42, at 43. 206 What’s the Difference between your Colas- Coca-Cola, Diet Coke, Coke Zero and Coca-

Cola Life?, https://www.coca-colaproductfacts.com/en/faq/brand/four-cola-difference/. 207 NESTLE, supra note 7, at 22. Coke previously introduced called Coke Zero in 2005. The

drink was sweetened with aspartame and acesulfame K. Both the former and new product

contain zero sugar, zero calories, zero carbohydrates, and zero caffeine. The original

marketing focus was on zero everything. Now the focus is on zero sugar specifically. Id. 208 Journey Staff, What’s the Difference Between Coke Zero and Coca-Cola Zero Sugar?,

Aug. 4, 2017, https://www.coca-colacompany.com/stories/what_s-the-difference-between-

coke-zero-and-coca-cola--zero-suga. See also, Journey Staff, Our Way Forward: Inside the

Bottle, Feb. 23, 2017, https://www.coca-colacompany.com/stories/inside-the-bottle; Eric

Bellman & Jennifer Maloney, Coca-Cola Launched 500 Drinks Last Year. Most Taste

Nothing Like Coke, WALL ST. J., Aug. 23, 2018, https://www.wsj.com/articles/coca-cola-

launched-500-drinks-last-year-most-taste-nothing-like-coke-1535025601; Cara Lombardo,

Coca-Cola Earnings Boosted by New Diet Flavors, WALL ST. J., Apr. 24, 2018,

https://www.wsj.com/articles/coca-cola-earnings-boosted-by-new-diet-flavors-1524576907. 209 The Coca-Cola Company, Q&A with Our President and Chief Executive Officer, supra

note 197, at 9.


2018, Coke also did a complete relaunch of the Diet Coke brand in

North America, in part to counter declining sales in 2016 and 2017.

The new slim cans have a sleeker packaging and come in four new

flavors designed to appeal to a younger audience: Ginger Lime, Feisty

Cherry, Zesty Blood Orange, and Twisted Mango.210

Coke has also tried moving consumers away from supersize

portions and back to smaller sizes. In 2009, it began offering a 7.5-

ounce mini-can with fewer than 100 calories in 140 countries.

Approximately 40% of all Coke’s sparkling brands are now available

in 8.5-ounce (250-milliliter) cans.211 These smaller sizes are

reminiscent of Coke’s early offerings in the original 6.5-ounce

bottles.212 The 7.5 and 8 ounce mini-cans are experiencing an increase

in sales at the same time that sales of the standard 12-ounce cans are

flat, even though the cost per fluid ounce is 3 times more for the mini-

can than the 12-ounce size – 9.5 cents per fluid ounce for the 8-ouonce

mini-can versus only 3.1 cents per fluid ounce for the 12-ounce can.213

The smaller sizes achieved 15% sales growth (while the traditional 12-

ounce cans and 2-liter bottles fell 2%) and are more profitable because

210 Jay Moye, Diet Coke Launches into 2018 with Full Brand Restage in North American, Jan.

10, 2018, https://www.coca-colacompany.com/stories/diet-coke-relaunch. 211 The Coca-Cola Company, 2016 Sustainability Report: Our Way Forward, (Aug. 18, 2017),

https://www.coca-colacompany.com/stories/2016-our-way-forward. 212 Brooke Metz, For Coca-Cola North America, Small Packs Bring Big Business, July 22,

2015, https://www.coca-colacompany.com/stories/less-is-more-for-coca-cola-small-packs-

mean-big-business. 213 Brad Tuttle, Why Soda Drinkers Are Happily Paying More to Get Less, MONEY, Jan. 27,

2016, http://time.com/money/4196272/coke-mini-can-value/.


of the higher per ounce price.214

Coke has also diversified its beverages beyond sodas. Coke

started its Venturing and Emerging Brands division in 2007, and has

since bought or launched several brands, including Zico and Core

Power (sports drinks), Honest Tea and Gold Peak (iced teas), Glaceau

and Fruitwater (waters), and Odwalla, Simply and Fuze (juices). Coke

purchased a 16.7% ownership stake in Monster for approximately

$2.15 billion, and the two companies entered into a strategic

partnership wherein Monster’s Peace Tea and other non-energy drink

brands were transferred to Coke, and Coke became Monster’s

preferred distribution channel.215 Coke has also launched a cold brew

coffee machine with Keurig, and in 2009 it introduced its Freestyle

soda fountain machine that offers over 100 different drink choices that

consumers can mix themselves. Both the Freestyle and Keurig

machines transmit consumer choice data to Coke, and the data is

analyzed and factored into marketing and product decisions.216

Interestingly, despite significant efforts to diversify in container size

and product offerings, the same classic Coke drink sold 100 years ago

remains the company’s number-one selling product.217

Coke says it wants “to be a more helpful and credible partner in

the fight against obesity. Across the Coca-Cola system, we are

214 Hadley Malcolm, 5 Ways Coke is Battling Fizzling Soda Sales, USA TODAY, Apr. 19,

2016, https://www.usatoday.com/story/money/2016/04/19/five-ways-coke-is-combatting-

fizzling-soda-sales/83076286/. 215 Nathan Buehler, 5 Companies Owned by Coca-Cola, INVESTOPEDIA, Oct. 12, 2018,

https://www.investopedia.com/articles/markets/011216/top-5-companies-owned-coca-cola-

ko.asp. 216 Suddath, supra note 42, at 43. 217 Id.


mobilizing our assets in marketing and in community outreach to

increase awareness and spur action.”218

To further its marketing and community outreach, in 2014,

Coke partnered with the Alliance for a Healthier Generation, the

Clinton Foundation, and other major beverages companies, including

Pepsi, to launch the Clinton Global Initiative to help fight obesity by

committing to reduce beverage calories consumed per person by 20%

by 2025. Coke and the other beverage companies agreed to use their

significant marketing and distribution strength to increase consumer

interest in beverage options such as smaller portions, water, and low-

calorie options, and to provide more calorie information and promote

greater calorie awareness on the more than 3 million vending machines

nationwide, as well as at fountain dispensers and in convenience

stores, restaurants and other facilities where their products are sold.

Coke and the other beverage companies agreed to concentrate their

efforts in those lower-income communities where food and beverage

choices have been limited historically and consumption is still high.

Critics have complained that the initiative is moving slowly,

noting there has only been a 3 percent reduction in consumption since

the initiative began. 219 Other critics have noted that Coke’s pledge is

218 2017 Form 10-K, supra note 20, at 31. 219 Alliance for a Healthier Generation, Alliance for a Healthier Generation and America’s

Beverage Companies Announce Landmark CGI Commitment to Reduce Beverage Calories

Consumed Across the Nation, (Sept. 23, 2014),

https://www.healthiergeneration.org/articles/alliance-for-a-healthier-generation-and-


merely reflective of what is already happening in the market place:

“All the trends are showing decreased consumption of high-calorie

beverages, and so what better way to get a public relations boost than

to promise to do what is happening anyway?”220

In 2017, Coke, Pepsi, Dr. Pepper and the ABA launched a

website at www.BalanceUS.org., stating the three companies “have

come together to support your family’s efforts to balance what you eat,

drink and do. We know an important part of finding that balance is

reducing the sugar from beverages in your family’s diet.”221 The

coalition reiterated its voluntarily goal to reduce beverage calories

consumed in the US by 20% by 2025, which it now calls the Balance

Calories Initiative. The initiative is first focusing on Los Angeles,

Little Rock, New York City, Montgomery (Alabama), and the

Mississippi Delta because these communities have obesity rates higher

than the national average.222 In addition, the website contains

exhaustive information on the sugar content of Coke products;

information on health concerns related to sugar, high fructose corn

syrup and artificial sweeteners; and dietary guidelines for sugar

consumption, all with a focus on balance and moderation. Coke points

out it is reducing sugar in more than 500 of its drinks worldwide, that

19 of its top 21 global brands have a reduced- or no-sugar alternative,

than in the U.S., 250 of the 800 plus beverages offered are reduced or

americas-beverage-companies-announce-landmark-cgi; Jacobs, Two Top Medical Groups

Call for Soda Taxes and Advertising Curbs on Sugary Drinks, supra note 47. 220 Gertner, supra note 10, at 166. 221 American Beverage Association, Find a Balance that Works for You,

https://www.balanceus.org/. 222 American Beverage Association, Cutting Sugar in the American Diet,

https://www.balanceus.org/industry-efforts/cutting-sugar-american-diet/.


no-sugar, and that since 2014, Coke has launched almost 500 new

reduced- or no-sugar drinks worldwide. Coke even directs those who

want no sugar to its teas, water and juice drinks.223 Coke also

implemented a policy not to market on television, websites, social

media and other channels that directly target children less than 12

years of age.224 Thus, as the regulatory environment and public

awareness of the obesity epidemic have changed, Coke has adapted

not only by challenging the new changes through lobbying and

litigation, but also by evolving the very nature of its business into a

complete beverage company, as opposed to a soda company. Changes

in regulations and public perception have resulted in the

transformation of Coke into a more diverse organization.

VII. CONCLUSION

Consumption taxes such as sin taxes are mostly enacted to

reduce consumption, usually for public health reasons, and also to

raise revenue. There is evidence that such taxes have had some impact

on soda consumption, although more research is needed over longer

periods of time to determine this conclusively. The corporate response

has been, predictably, opposition on multiple fronts, with litigation,

lobbying, sponsored research to achieve specific scientific outcomes,

and public relations campaigns. The corporate response has also been

223 Product Facts: The Coca-Cola Company, Does Sugar Make You Fat, https://www.coca-

colaproductfacts.com/en/faq/sugar/does-sugar-make-you-fat/ 224 The Coca-Cola Company, 2016 Sustainability Report: Our Way Forward, supra note 211.


to change corporate products, which is to say, the supply side of the

equation. Here, the imposition and activism of sugar taxes has induced

Coke (as much as the sugar taxes have induced consumers) to alter its

behavior, by expanding its products lines with reduced portions and

reduced or zero sugar products.

Whether or not soda taxes are effective at reducing demand for

public health reasons, or merely generate a new source of revenue, a

review of Coke’s responses to sugar taxes shows that the supplier has

changed its behavior. Coke’s business strategy was to sell a lot of

sugary soda. Coke’s business strategy now is to sell a variety of

beverages, including many healthier options.

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